The New Gold Rush – Defense Systems for India
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The world’s largest defense importer, India, has announced a new policy inviting foreign defense manufacturers to set up shop as minority partners in India. According to foreign companies, the opportunity is too good to miss. India has drawn up a shopping list for tens of billions of dollars of foreign fighter jets, armored vehicles, submarines, and helicopters but it will only sign the checks if they are made in India.
As reported by industryweek.com, the deals would boost job creation and bring key defense technologies into India. Europe’s Airbus Group, angling to sell its Panther helicopters, has said that if it wins a contract worth several billion dollars and expected to span at least a decade, it would make India its global hub for the multi-purpose choppers.
American Lockheed Martin said that if its F-16 fighter jets are selected, it would compete with Saab for an order of close to $15 billion and would support the advancement of Indian manufacturing expertise. Germany’s ThyssenKrupp Marine Systems and France’s Naval Group are eager to compete for a contract of up to $10 billion to build submarines in the South Asian country.
Prime Minister Narendra Modi, with less than two years to national elections, is under intense pressure to create more jobs for the hundreds of thousands of people joining the workforce every month. Growth in the first three months of 2017 slowed to 6.1%. Experts expect further disruption as businesses adjust to a new nationwide goods and services tax.
“Countries that have a robust defense industry have a few large companies that are supported by their government with large, long-term defense orders,” said Amber Dubey of the KPMG consultancy in India. “They, in turn, create an ecosystem of large and small suppliers to stay competitive.”
“We’d like to see the Indian government work with the US government to ensure that these acquisition policies don’t disadvantage US companies just because we can’t get the lowest price,” Cara Abercrombie, former US deputy assistant secretary of defense for Southeast Asia, said. Under the strategic partnership policy, India will lineup domestic companies that foreign players have to choose from to set up local plants.
For the Indian companies, which would hold the majority stake, it is a big win, says Dhiraj Mathur, an aerospace and defense specialist for the PwC consultancy.
“You know nothing about defense manufacturing and you’re going to partner with a global leader to make highly sophisticated equipment and the only reason they’re talking to you is because the government has told them to,” he said.
China also built up local defense equipment manufacturing by forcing international firms to link up with Chinese companies and to hand over technology. However, In India’s case, the foreign players are still pushing for ownership. “Let us take a lead, let us be the majority,” said Ashish Saraf, vice president for industrial development at Airbus. “Or let the Indian guys assume full liability”.
