Defence sector in India, cache of opportunities: CII-KPMG Study

The defence industry in India is poised at an inflection point in its expansion cycle driven by the modernization plans, the increased focus on homeland security, and India’s growing attractiveness as a ‘home market’ defence sourcing hub. A joint study by CII-KPMG, Opportunities in the Indian Defence Sector: An Overview reveals that Indian Industry is upbeat about the opportunities in defence and aerospace, and eager to grow its industrial capabilities in this space, but is looking to Government to continue its process of developing and fine-tuning the procurement regime and industry drivers that will enable industry to grow a robust and sustainable defence industry in India. India currently procures approximately 70 percent of it equipment needs from abroad, but aims to reverse this balance and manufacture 70 per cent or more of its defence equipment in India. While the government has put in place the building blocks to incentivise the growth of a domestic defence industry, the report identifies three areas where industry is seeking further Government input. These are the procurement process, the need for a defence industrial strategy for India and tax and regulatory incentives. Mr Baba Kalyani, Chairman, CII National Committee on Defence stated that ‘The amendments to DPP 2008 (Amendments 2009) are being viewed upon by the industry as a positive development. The DPP 2008 (Amendments 2009) which have came into effect from 1 November 2009 are encouraging and we at CII welcome these forward looking reforms.’ He was of a view that the provisions incorporated in the amendments would go a long way in encouraging larger participation from the Indian Industry’. Commenting on the release of the report, Marty Philips, Global Head, Aerospace and Defence, KPMG, said, “India is at a hugely exciting juncture in the growth of its defence industry. By leveraging off its own major defence procurement cycle and its inherent skills and capabilities, India can use this opportunity to become a major defence production hub for both domestic and global defence systems. Our report with CII highlights the considerable progress made to-date by Government and industry and provides a number of pointers to ensure that going forward full use is made of the opportunity”. ” With skilled intensive manufacturing capabilities and a world class IT base, India has the right ingredients to become a key link in the global defence supply chain. The outlook is bright, but will require Government’s on-going active management and fine-tuning of policy, regulations, process and fiscal environment to help ensure strong domestic growth and achievement of self-sufficiency”, said Richard Rekhy, Deputy CEO, KPMG in India “However, Indian industry also needs to respond to this opportunity in a rapid and well structured manner”.