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.