Grabbing a slice of India\’s lucrative defence pie

As India positions itself as an emerging superpower, it is also readying its armed forces to deal with the multi-dimensional challenges that lie ahead with an ambitious expansion plan. And every global arms major is eyeing a share of the $30 billion the country is expected to spend on arms imports over the next decade.

This was more than evident at the sixth edition of Asia\’s largest defence exposition held in Indian capital New Delhi this February. Over three days from Feb 15 to 18, arms manufacturers fought to grab eyeballs as India\’s defence planners from the civilian and military sectors wound their way through DefExpo 2010 to examine the best the world had to offer and gauge how best it met the requirements of the Indian armed forces.

Among the foreign participants were the crème de la crème of arms manufacturers such as Boeing, Lockheed Martin, General Dynamics, Raytheon, BAE Systems, Finmeccanica, Rosoboronexport State Corporation, Israeli Aerospace Industries and European Aeronautics Defence and Space Company (EADS).

The Indian participation was spearheaded by the Defence Research and Development Organisation (DRDO), followed by the Tatas, the largest exhibitor from the private sector.

The exhibition at the sprawling Pragati Maidan grounds attracted over 126,000 visitors, including 85,000 from the business segment alone.

The event was attended not just by arms majors but also by government delegations from several countries.

Defence ministers from Britain, Bulgaria, Hungary, Nigeria, Turkey, Uganda, Senegal and Suriname, along with official delegations from 41 countries, participated.

Naval chiefs from Kazakhstan, Mozambique, Brunei, Qatar and Senegal and Mongolia\’s army chief also attended the exhibition.

About 25 new products were launched by Indian and foreign companies during the exhibition and more than 550 business-to-business meetings were also held. Various business bodies such as FICCI, CII, Assocham and PHD Chamber of Commerce organised thought-provoking seminars during the show.

DefExpo has come a long way since it was first held in 1999 with just 197 participants. This time around, 650 exhibitors from 28 countries, including hosts India, participated in the exhibition, which featured 10 country pavilions and 41 official delegations. This is up from the 447 exhibitors at the 2008 edition of the show.

More than an exhibition where equipment is showcased, negotiations were held and deals struck, DefExpo is also a pointer to changing times as India seeks to diversify its arms purchases. To not only acquire the best that is available but also to upgrade its industrial base, in both the public and private sectors, by simultaneously acquiring technology in its drive towards indigenisation of its defence sector.

Thus, when DefExpo was first held, Russia was the principal source of India\’s arms imports - estimated at $30 billion since the 1960s.

Today Russia remains India\’s biggest supplier of military hardware with deals estimated at $1.5 billion annually.

However, countries like Israel and the US are fast catching up, as are France and Britain. Israel has emerged as the second largest supplier, with annual sales estimated at $1 billion since 2001. Not surprisingly, pavilion-wise, Israel was the largest participant at DefExpo 2010, with 21 companies showcasing.

What then, in concrete terms, did DefExpo have to offer Indian manufacturers?

As R.K. Singh, the secretary for defence production, put it: \”We are primarily looking at building better partnerships between India and foreign companies for faster growth of indigenous capabilities. This is a forum to catalyse this.\”

Minister of State for Defence Production M.M. Pallam Raju explained it another way: with 41 offset contracts worth more than $10.5 billion in the pipeline, this points to the robust state of India\’s defence industry.

\”There are 41 offset contracts worth more than Rs.49,000 crore ($10.5 billion) in the pipeline at various stages of negotiations which are going to materialise in the next couple of years. This will provide further impetus to the Indian industry,\” Raju said.

\”India is committed and alive to aspirations of private industry and their problems. More than Rs.4,200 crore ($910 million) of offset contracts have already materialised.\” Under an offset contract, a percentage of all deals has to be reinvested in Indian industry.

The offset clause is applicable for all procurement proposals where indicative cost is above Rs.300 crore ($60.5 million) and the schemes are categorised as \’Buy (Global)\’, which involves outright purchase from foreign/Indian vendors, and \’Buy and Make with Transfer of Technology\’, which means purchase from foreign vendors followed by licensed production.

But India has no intention of unnecessarily projecting military might (power) beyond its frontiers.

As the minister put it: \”The external challenges are going to be complex and multifarious in times to come, given the global geopolitical situation and specially the one in our near neighbourhood.

\”India, as a nation state, is progressing, and progressing fast, economically and in many other sectors, which is going to result in multi-spectral and multi-dimensional challenges from within and outside, for which our armed forces have to remain ever ready for all eventualities.\”