February 6, 2015
The annual opportunity for Indian domestic companies, including public sector firms, in the defence and aerospace sector is expected reach USD 41 billion by Fiscal Year 2022 driven by domestic and external demand, according to a report.
The report, entitled 'India -- Aerospace and Defence', prepared jointly by industry body FICCI and financial services firm Centrum Capital, also projects a USD 620 billion defence budget between FY14 and FY22, of which 50 per cent would be on capex.
The sector would offer USD 168 billion of cumulative opportunity during this period to domestic companies, it said.
"We expect India to expand its defence budget as it seeks to maintain a semblance of geo-political balance in Asia as the US is likely to withdraw to repair its financials and narrow the large gap that has developed with China militarily.
"Massive modernisation undertaken as 50 per cent of current equipment is obsolete due to less than adequate spend on defence in the past and also reasonably comfortable funding position on the back of healthy tax revenues and comfortable debt/GDP ratio relative to other nations and India's own history," the report said.
The report observed that the fiscal strain on the balance sheets of developed countries will pressure defence spends and global players will start looking out for cheaper sourcing (products and services) from other countries.
In that respect, it said, "We believe India has the key ingredients (large and relatively low-cost engineering talent pool along with comfort of western nations with India from a geo-political perspective) to deliver on the opportunity.
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