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Arms spending: India grows as west shrinks

Discussion in 'International Relations' started by hotstud69, Jun 17, 2010.

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  1. hotstud69

    hotstud69 Lieutenant FULL MEMBER

    Apr 14, 2010
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    Ajai Shukla / Business-standard.com
    India’s military modernisation presents opportunities for defence majors.
    With global arms majors focused on the commercial opportunities presented by India’s military modernisation programme, consulting firm Deloitte India and the Confederation of Indian Industry (CII) have produced a detailed report on the country’s defence market and the possibilities it presents. Entitled, “Prospects for Global Defence Export Industry in Indian Defence Marketâ€, the report was released today at the Eurosatory 2010 defence exhibition in Paris.
    The report follows a KPMG-CII report in January on “Opportunities in the Indian Defence Sectorâ€, a PricewaterhouseCoopers report in April on “Aerospace and Defence Insights†and a CII report last month on foreign direct investment (FDI) in the defence sector.
    The Deloitte-CII report points out that as defence expenditure drops in the traditionally big-spending western economies, including the USA, Indian defence spending will grow steadily over the next 20-25 years, as New Delhi implements a major defence modernisation.

    * 180 Sukhoi-30MKI (pictured) fighters, worth $9.9 billion.
    * 126 medium fighters (to replace the MiG-21) for $9.09 billion.
    * 120 indigenous Tejas light combat aircraft (LCA), for which an additional $1.71 billion has been allotted.
    * Advanced and intermediate jet trainer aircraft.
    * The Indo-Russian Fifth Generation Fighter, with an estimated development cost of $9.9 billion.

    * Upgrades to more than 60 MiG, Jaguar and Mirage aircraft

    Linking defence spending to the International Monetary Fund (IMF) prediction that India’s economy will grow in real terms by 7.5 per cent from 2010 to 2014, the Deloitte-CII report says that India’s current defence expenditure of $32.03 billion will rise to an estimated $42 billion by 2015. The capital expenditure on new weapons platforms will rise from the current $13.04 billion to $19.2 billion in 2015.
    Inflation, warns the report, somewhat tempers these figures: the real growth in defence expenditure is expected to be marginal over the next two years and about 5.3 per cent from 2012 to 2015.
    Nevertheless, the figures remain impressive. During the current Five Year Plan (2007-12), India will spend $100 billion on weaponry, which will rise to $120 billion during the next Five Year Plan (2012-17).
    Deloitte-CII point out that 70 per cent of this procurement, in value terms, is from foreign sources; Indian companies supply only 30 per cent, the bulk of that as components and sub-assemblies to state-owned companies. The report is sceptical about the Indian MoD’s (Ministry of Defence’s) oft-repeated target of 70 per cent indigenous production. If that target is to be achieved by 2015, local industry would need to more than double in size, an unlikely event.
    India’s domestic defence sector benefits from increasing MoD requirements to “buy local†as well as taxation arrangements that advantage local firms; in the case of defence public sector undertakings (DPSUs), tax advantages can be as high as 50 per cent. Deloitte-CII, however, see clear opportunities for foreign firms in providing specialist inputs to Indian defence manufacturers, which they require for developing advanced platforms and systems.
    Land systems
    The report notes that India’s acquisition of land systems suffered a serious slowdown in 2009. Many of the postponed acquisitions relate to the Army’s $8-billion artillery modernisation programme (called the Field Artillery Rationalisation Plan, or FARP). This aims to induct between 2,700-3,600 guns over the next two decades at a cost of $4.77-6.48 billion.
    Procurement has long been initiated for four kinds of guns: air-mobile ultralight howitzers for mountain divisions on the China border, towed and wheeled 155mm guns for plains infantry and mountain divisions, self-propelled tracked and wheeled guns for mechanised strike formations, and mounted gun systems. These projects, however, have moved very slowly.
    Besides upgraded artillery, the report also highlights the proposed acquisition and upgrades of tanks, UAVs (Unmanned Aerial Vehicles) and 300 helicopters for Army Aviation. India’s obsolescent air defence systems also provide major opportunities to foreign vendors.
    Navy and Coast Guard
    Deloitte-CII note that naval acquisitions are earmarked for a greater degree of indigenisation than the other services. Foreign shipbuilders are pointed to opportunities for modernising Indian shipyards to enable them to produce large, advanced battleships. By 2022, the Indian Navy plans to have a 160-plus ship Navy, including three aircraft carriers, 60 major combatants (including submarines) and about 400 aircraft of different types.
    The report highlights the Indian Navy’s “Indigenisation Plan (2008)â€, which forecasts a requirement for marine engineering equipment, including gas turbines, diesel generators, pressure cylinders, hydraulic manipulators and motors.
    Furthermore, India’s Coast Guard, which is 70 per cent short of its requirements, plans to double its assets in the next few years and triple them over a decade. Its current fleet of 76 ships and 45 aircraft is likely to be ramped up in five years to 217 ships and 74 aircraft. Some 70 of these new ships would be large vessels.
    The report notes that India is struggling to indigenise aerospace production. Historically d0ependent upon Russia, the Indian Air Force (IAF) is looking to diversify its vendor base for combat and transport aircraft, providing major opportunities for aerospace firms

    BY: Ajai Shukla / Business-standard.com
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