AEROSPACE & DEFENCE SECTOR OVERVIEW-2020

Statistics, news & updates: everything you need to know about the Aerospace & Defence Industry in India

Snapshot

  • Summary
  • COVID-19 Impact
  • Industry Clusters
  • Growth Drivers
  • Key Players
  • Market Stats
Aerospace-Industry-2018

Covid Impact

The Aerospace and Defence Industry in India is a strategically important sector in the country.

It has a strength of over 1.3 million active personnel. This makes it the world’s 2nd largest military force after the People’s Republic of China. Besides it also has the world’s largest volunteer army. In recent years, the defense sector has grown extensively. It has increased at a CAGR of 9.7% from 2008-2016, reaching current levels of USD 42.83 billion in 2017-18. The Aerospace and Defence industry in India will reach around $70 billion by 2030.

At present, India’s defense industry accounts for about 1.6% of the GDP. In fact, India has the 5th largest defense budget in the world. The allocation of Defence in India’s union budget 2017-18 stood at USD 41 billion. Out of this, USD 13.3 billion i.e. 31.7% of the defense budget is spent on capital acquisitions. Budget 2017-18 has seen a 5.3% increase in defense allocation as compared to budget 2016-17. Moreover, the total budget for the Indian military for the financial year 2018-19 stood at USD 62.8 billion. This accounts for 12.1% of the total Union Government expenditure for 2018-19. The military budget of India is about 1.49% of the total GDP for the year 2018–19.

About 70% of the defense requirements are met through imports. Imports account for a major portion of defense-related requirements and this offers a huge opportunity for foreign investors. In the coming years, the Government target’s to step up local sourcing to reduce the defense budget by a significant number. The government is currently pursuing the goal of having a turnover of 25.5 billion USD in military goods and services by 2025.

The Aerospace sector in India has had a steady growth in both Defence and Civil Aviation sectors.

Aerospace is predominant to bolster the Defence sector and contributes nearly 50% of the Value of Production of the sector. With over 300 million in the middle-class income group who can travel at least once a year by air and India’s growing economy that will boost the traffic trends both in passenger and cargo, the civil aviation industry in India also offers large growth opportunities. In the last five years, we have seen a rapid growth of airlines and passenger traffic in India at over 15% per year. Additionally, the number of passengers travelling from India to international destinations is also estimated to be around 100 million a year. This further signifies high demand for airline services in the coming years. In fact, the civil aviation sector in India is growing rapidly. It has recorded an annual growth of over 41% in passenger traffic.

With a value of about $16 billion, the Aviation Industry in India is the 9th largest in the world. It further aims to become the 3rd largest by 2020. The Indian civil aviation market is one of the fastest-growing markets in the world. It has travellers increasing at 20% every year. The growth is expected to continue with the plan of investments of about USD 1.83 billion in the development of airport infrastructure by 2026. There are enormous opportunities for foreign investments. Many global Aerospace and Defence companies are looking at India as a potential low-cost manufacturing destination and a high potential market.

Covid Impact

In November 2020, the Government of India announced that it is likely to increase the total number of allowed domestic flights to 75% of the pre-COVID-19 levels, as it expects a rise in passenger numbers due to the festive and holiday season.

As per the report published by IATA on 14th April 2020, there has been a 47% decrease in passenger demand from 2019. Also, the Indian aviation industry has suffered a huge revenue impact which is estimated to be a loss of $ 11,221 million as compared to 2019. The potential loss of jobs is expected to be around 3 million in 2020.

The aviation industry in India was already operating at 87% of their pre-pandemic capacity which has fallen to 71% in 2021 with many countries banning flights from India. India currently is facing the worst second wave of the pandemic than any other country.

The COVID crisis has also led to a digital revamp for airports. Compulsory web check-ins in order to provide a touchless experience to the passengers. Pre-Covid forecasts indicated that in 2036 aviation industry will provide 98 million jobs and generate $5.7 trillion in GDP. Post-Covid, the situation has reversed completely throwing the industry in a state of flux.

2020 annual defense budget (excluding defense pensions) was scheduled to be roughly $47 billion, a marginal increase of 5.8 percent compared with last year.  The impact of COVID-19 did have Defense Ministry looking to shrink its budget by roughly 20% on the year. But even prior to COVID, the budget is generally perceived as inadequate for the initiatives for modernization by the Indian forces.

The statistics below are taken from Industry data available pre-Corona virus impact.

Map – Industry Clusters

Aerospace & Defence Cluster

Growth Drivers

  • 100% FDI is allowed in defence industry; wherein 49% is allowed under automatic route and beyond 49% through Government route.
  • 3% increase in defence allocation was recorded in budget 2017-18 compared to budget 2016-17.
  • The allocation towards defence in budget 2017-18 stood at $ 41 billion with $ 13.3 billion (or 31.7% of the total budget) reserved for capital expenditure.
  • The total budget sanctioned for the Indian military for the financial year 2018-19 is $ 62.8 billion; accounting for 12.1% of the total Union Government expenditure for 2018-19.
  • India has the 5th largest defence budget in the world.
  • The civil aviation sector in India is growing rapidly. It has recorded annual growth of over 41% in passenger traffic

Market Stats

  • India’s MRO (Maintenance, Repair and Overhaul) segment is estimated to grow at 10 percent and reach USD 2.6 billion by 2021.
  • The Indian defence expenditure has increased at a CAGR of 9.7% from 2008-2016, reaching current levels of USD 42.83 billion in 2017-18.
  • Annual turnover by the private sector in defence and aerospace sector in 2018-19 is $ 2.4 billion.
  • Indian aerospace and defence market to reach more than USD 23 billion by 2024, growing at 5%+ CAGR.
  • India is expected to become the 3rd largest aerospace industry by 2020.
  • It has the world’s 2nd largest military force after the People’s Republic of China.
  • The military budget of India is about 1.49% of the total GDP for the year 2018–19.

Key Players in India

National

  • Bharat Dynamics Ltd.
  • Tata Power Static Engineering Division
  • Mahindra Aerospace
  • Kalyani Strategic Systems Ltd
  • Tata Advanced Systems Ltd.
  • Reliance Naval and Engineering Limited
  • L&T Heavy Engineering
  • Ashok Leyland Defense
  • Adani Aero Defense Systems & Technologies Ltd

International

  • Thales Group
  • Honeywell International
  • Northrop Grumman Corporation
  • Lockheed Martin Corporation
  • BAE Systems Ltd.
  • Rafael
  • Dassault Aviation
  • Raytheon
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