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India is poised to become a favourite destination for global defence sector players with total offset opportunity for the commercial segment in the country set to cross the $10-billion mark in 2013.
With the Government expected to raise the foreign investment limit from 26 per cent to 49 per cent in the defence sector this year, the country is likely to witness a new rush of investments, according to a recent study by Deloitte.
The Deloitte Aerospace and Defence Outlook 2013 notes that while the global defence industry is expected to shrink, the Indian defence sector is surging.
“India continues to be one of the promising aerospace and defence (A&D) markets in the world due to the increasing demand in A&D equipment for the armed forces,” the report says.
Stating that milestones in certain deals are expected to be achieved in 2013, such as submarines, missiles, and the Indian Air Force Medium Multi-Role Combat Aircraft (MMRCA), the report adds that new joint ventures are likely to be signed between Indian private and overseas companies.
Nidhi Goyal, Director, Deloitte Touche Tohmatsu India, added, “The global defence industry can take advantage of the promising Indian Aerospace and Defence market owing to the increasing demand of A&D equipment by the armed forces’’.
The Government will focus on indigenisation with increasing presence of Indian companies and also give cost advantages relating to basic design and engineering services, components, and assemblies manufacturing.
Once indigenous manufacturing takes root, research and development for the indigenous military industry and civil aircraft is likely to be the other focus area of the Indian Government, the report added.
The total offset contracts of more than $4.5-5 billion have been signed by Indian companies with foreign companies since the offset policy came into effect in 2005.
However, with the new offset guidelines of 2012 and the assumption of a formal civil offset policy, the total offset opportunity for the commercial segment is valued at $10-15 billion.
nivedita.ganguly@thehindu.co.in
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