November 30, 2015

HOW FOREIGN MANUFACTURERS CAN BENEFIT FROM INDIA’S MILITARY NEEDS

Posted by The Himalayan Voice:
[Most of India’s internal expertise in defense manufacturing lies within large government-owned projects in the public sector, Bagla said. To date, Indian private industry has already demonstrated a capacity to work well with foreign firms. For example, Tata Advanced Systems currently manufactures wings for C-130 Hercules transport aircraft in India, and also produces the main cabin for S-92 Sikorsky helicopters.]

By Make In India
India is keen to modernize and develop its own defense industry and has taken steps to attract foreign investment, thanks to Prime Minister Narendra Modi’s “Make in India” campaign to produce much-needed jobs in industry and manufacturing.

Indeed, there are many compelling reasons why U.S. defense manufacturers should consider entering the Indian market. Since 2014, India has significantly increased space for foreign ownership from 26 percent to 49 percent. And the nation has built more flexibility into its tax and trade laws to ease the process of doing business.

“Both countries are free market democracies and are strategically aligned. This backdrop makes India very attractive to defense companies from all over the world, but even more so to American companies,” said Gunjan Bagla, managing director of Amritt, Inc., a Los Angeles-based management consulting firm focused on India.

India is the largest buyer of weapons and security equipment in the world, and the United States is the largest producer. American firms can join forces with India’s defense sector to apply their outside expertise and strengthen India’s in-house capabilities.

Strategically, India borders on two non-democratic countries—China and Pakistan—which have both fought wars with India. And India, like many nations worldwide, has suffered from domestic and international terrorism. Thus, it is important that India have a strong defense industry to support its army, air force, navy, coast guard and paramilitary services.

The Make in India policy promises to be a boon for India’s armed forces, which are “in dire need of modernization,” said Sumit Ganguly, professor of political science at Indiana University. To meet production gaps in the past decade, India’s state-run arms industry has imported close to $60 billion in military equipment. This policy has been “a serious drain on the exchequer. The country would be far better off if it could attract more foreign investment in the defense sector,” Ganguly said.

Most of India’s internal expertise in defense manufacturing lies within large government-owned projects in the public sector, Bagla said. To date, Indian private industry has already demonstrated a capacity to work well with foreign firms. For example, Tata Advanced Systems currently manufactures wings for C-130 Hercules transport aircraft in India, and also produces the main cabin for S-92 Sikorsky helicopters.

“India’s defense services have been able to experience the quality and capability of American hardware—such as the Lockheed C130J and Boeing C17 transport aircraft—as well as weapon- locating radars and state-of-the-art reconnaissance naval aircraft,” Bagla said. “This only increases the appetite for American products and mitigates the risk of tying up investor capital in India.”

The principal attraction for foreign investors in the Indian defense market is the ability to manufacture products at a significantly lower cost because of India’s wage structure—“a small fraction of what one would pay an American aeronautical engineer of comparable quality,” Ganguly said. There is also the ability to directly supply India’s armed forces and meet their ongoing demand for modern, upgraded equipment. And India’s “offset” or countertrade requirements have been loosened to give foreign investors more flexibility in profiting from the Indian market.

“Clearly there is profit potential from sales within India. And India’s engineers can expand the design and product development skills of foreign companies,” Bagla said.

“Investments in the defense industry can also have corollary payoffs in many sectors, from weather and navigation satellites, to new materials suites for India’s hot and humid climate, to highly reliable manufacturing practices and much more.”