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

Summary

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 defence 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 is estimated to reach around $70 billion by 2030. At present, India’s defence industry accounts for about 1.6% of the GDP. In fact, India has the 5th largest defence 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 defence budget is spent on capital acquisitions. Budget 2017-18 has seen a 5.3% increase in defence 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 defence requirements are met through imports. Imports account for a major portion of defence-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 defence 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-19 Impact

The aerospace and defence industry has clearly seen the consequences of COVID 19. Historically, the Indian aviation sector has contributed around $ 72 billion to the national GDP. With the ongoing lockdown, even if we assume a 25% decline in aerospace industry revenues, it comes to around $1.5 billion to $2 billion of losses.

In the month of February when the COVID 19 outbreak was slowly progressing, The International Civil Aviation Organization (ICAO) had estimated a 2% decline in international passenger capacity for India. In the month of March when the disease was declared a pandemic, the same estimations went up to a whopping 27%. As per the ICAO and the Airports Council International (ACI) projections (prior to the lockdown period), the Asia-Pacific sector could suffer losses close to $12 billion. However, the loss projection figures given by The International Air Transport Association (IATA) are quite high. Post lockdown, they estimated the aviation industry loss of up to $113 billion.

In order to combat the situation, many state governments have permitted local aerospace and defence manufacturers to resume manufacturing activities with immediate effect.

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
Frequently Ask Questions
Talk to Our Experts