The Indian Defense Industry: Market Opportunities and Entry Strategies, Analyses and Forecasts to 2017

iCD Research, June 2012, Pages: 154

Product Synopsis
This report is the result of SDI/ICD Research's extensive market and company research covering the Indian defense industry. It provides detailed analysis of both historic and forecast defense industry values including key growth stimulators, analysis of the leading companies in the industry, and key news.

Introduction and Landscape
Why was the report written?
The Indian Defense Industry Market Opportunities and Entry Strategies, Analyses and Forecasts to 2017 offers the reader insights into the market opportunities and entry strategies adopted by foreign original equipment manufacturers (OEMs) to gain market share in the Indian defense industry.

What is the current market landscape and what is changing?
The Indian defense market offers numerous market opportunities to both domestic and foreign manufacturers. As one of the largest defense equipment markets in the world, the country is expected to spend US$120.3 billion on capital acquisition alone during the forecast period. In the next two years, the country is forecast to spend a significant amount of money on homeland security, intelligence and cyber security, primarily due to an increasingly hazardous geopolitical environment, the threat of terrorism and internal security concerns.

What are the key drivers behind recent market changes?
The Indian defense expenditure is primarily driven by the need to replace the country's ageing military hardware and to protect India from its hostile neighbours. The country's strong economic growth has also fuelled India's defense industry growth. The China and Pakistan are spending heavily on enhancing their military power, which is putting pressure on the Indian government to increase its defense expenditure and focus on modernizing its armed forces.

What makes this report unique and essential to read?
The Indian Defense Industry Market Opportunities and Entry Strategies, Analyses and Forecasts to 2017 provides detailed analysis of the current industry size and growth expectations from 2013 to 2017, including highlights of key growth stimulators. It also benchmarks the industry against key global markets and provides a detailed understanding of emerging opportunities in specific areas.

Key Features and Benefits
The report provides detailed analysis of the current industry size and growth expectations from 2013 to 2017, including highlights of key growth stimulators. It also benchmarks the industry against key global markets and provides detailed understanding of emerging opportunities in specific areas.

The report includes trend analysis of imports and exports, together with its implications and impact on the Indian defense industry.

The report covers five forces analysis to identify various power centers in the industry and how these are expected to develop in the future.

The report allows readers to identify possible ways to enter the market, together with detailed descriptions of how existing companies have entered the market, including key contracts, alliances and strategic initiatives.

The report helps the reader to understand the competitive landscape of the defense industry in India. It provides an overview of key defense companies together with insights such as key alliances, strategic initiatives and a brief financial analysis.

Key Market Issues
Despite expanding opportunities in the Indian defense industry, the government's comparatively strict regulatory regime poses challenges for foreign investors who are keen to enter the country. With an FDI limit of just 26%, foreign OEMs are unwilling to extend sensitive technologies to their Indian joint venture partners. The critical area of concern is the offsets in defense, which have been placed at 30%, and in some cases, such as in the development of Medium Multi-Role Combat Aircraft (MMRCA), offsets rise to 50%.

As a percentage of GDP, Indian defense expenditure stood at 2.1% during 2012. While this is a larger percentage than China, the country's defense expenditure as a percentage of GDP is lower than the majority of large spenders such as US and Russia. During the forecast period, Indian defense expenditure as a percentage of GDP is expected to increase to 2.3%.

Insufficient information and the lack of clear future plans have been a key challenge for both the private sector and foreign companies in planning the development of research and development technology or the formation of joint ventures. Although the Ministry of Defense has agreed to provide a public version of the long-term plan, its effectiveness remains to be seen.

Since the early 1970s, the Indian defense procurement process has included corruption, delays and bureaucratic hurdles, due to the monopoly of the civilian bureaucracy and politicians over the purchase decisions of the armed forces. Indeed, although the armed forces are in charge of conducting trials on shortlisted equipment and forwarding their recommendations to the Ministry of Defense, any financial negotiations are conducted by civilian officials. This gives rise to the opportunity for corruption, by way of bribes and collecting money for election funds.

Key Highlights
The Indian defense industry is one of the fastest-growing global defense markets. India's defense capital expenditure, which refers to the part of the defense budget that is spent on the acquisition of all types of military hardware and technology, has grown at a CAGR of 16.22% over the review period. In 2012, India was allocated US$15.36 billion for defense capital expenditure in the budget. Defense expenditure is expected to record a CAGR of 13.35% during the forecast period, to reach an annual expenditure of US$69.41 billion by 2017.

Government spending on India's homeland security market has increased significantly as a result of terrorist attacks, the smuggling of arms and explosives, and domestic insurgency. In 2012, the country's homeland security budget registered an increase of 13.4% over the previous year, with the Central Reserve Police Force (CRPF) receiving the largest share of the budget. Due to the nature of the security threats which the country faces, the main opportunities for growth in homeland security are expected in the aviation, mass transportation and maritime security markets.

India's defense imports increased considerably during 2007-2011, making it the largest global defense importer in 2011. The country's imports constituted 8.5% of the total global arms transfer in 2011. The government's modernization plans, combined with the external threats faced by India, have led to the country requiring a large amount of imports to fulfill its defense requirements. Since India's domestic defense industry is limited, India is expected to continue importing large amounts of its defense requirements over the forecast period.

India's defense industry is still in its early development stage, and defense exports are limited to a few neighboring countries and less developed nations such as Mauritius, Bangladesh, Nepal and Indonesia. During review period, ships, aircraft and sensors were the three-most exported defense goods. Exports are expected to increase during the forecast period, in line with the growth in the private sector. During the forecast period, foreign OEMs will focus on meeting their offset norms through sourcing. Consequently, India could become the manufacturing and sourcing hub of these foreign OEMs. Major companies such as BAE Systems and Lockheed Martin are considering setting up a manufacturing center in India to serve the global market

1 Introduction
1.1. What is this Report About?
1.2. Definitions
1.3. Summary Methodology
1.4. SDI Terrorism Index
1.5. About Strategic Defence Intelligence
2 Executive Summary
3 Market Attractiveness and Emerging Opportunities
3.1. Defense Market Size Historical and Forecast
3.1.1. India's total defense expenditure to grow at a CAGR of XX% over the forecast period
3.1.2. Hostile neighbors and modernization initiative will be the industry's primary growth drivers
3.1.3. Defense budget as a percentage of GDP will remain at an average of XX% over the forecast period
3.2. Analysis of Defense Budget Allocation
3.2.1. Capital expenditure allocation expected to remain at an average of XX% during the forecast period
3.2.2. Army gets the largest share of the defense budget
3.2.3. Defense ministry will spend US$XX billion on its army over the forecast period
3.2.4. Defense ministry will spend US$XX billion on its air force over the forecast period
3.2.5. Expenditure for navy is expected to grow at a CAGR of XX% over the forecast period
3.3. Homeland Security Market Size and Forecast
3.3.1. Homeland security budget of India estimated at US$XX billion for the year 2012
3.3.2. Cross-border terrorism and domestic insurgency to be the main drivers of the homeland security
3.3.3. India falls under “worst affected” of terrorism category
3.3.4. India has terrorism index score of XX
3.4. Benchmarking with Key Global Markets
3.4.1. India's defense budget expected to grow at a CAGR of XX% which is largest among the key global defense spenders
3.4.2. The US and China dominate the global defense industry
3.4.3. India allocates a lower share of its GDP for defense than countries with significant global defense expenditure
3.4.4. India faces significant threat from foreign terrorist organizations
3.5. Market Opportunities: Key Trends and Growth Stimulators
3.5.1. Demand for howitzers is expected to increase during the forecast period
3.5.2. FDI set to increase, driven by government's policy shift from 'buy' to 'make' strategy
3.5.3. UCAVs, combat systems and fighter aircraft divisions to be areas of key growth
3.5.4. India to spend on UAVs during the forecast period
3.5.5. India expected to replace its military helicopters
3.5.6. India expected to modernize its navy with frigates and submarines
4 Defense Procurement Market Dynamics
4.1. Import Market Dynamics
4.1.1. India was the largest arms importer during 2007-2011
4.1.2. Russia dominates Indian arms imports
4.1.3. Aircrafts accounted for the majority of defense imports during 2007-2011
4.2. Export Market Dynamics
4.2.1. India's low profile in defense exports is set to change over the forecast period
4.2.2. Underdeveloped nations across Asia, Africa and Latin America are the main importers of Indian defense goods
5 Industry Dynamics
5.1. Five Forces Analysis
5.1.1. Bargaining power of supplier: low to high
5.1.2. Bargaining power of buyer: high
5.1.3. Barrier to entry: medium to high
5.1.4. Intensity of rivalry: high
5.1.5. Threat of substitution: medium to high
6 Market Entry Strategy
6.1. Market Regulation
6.1.1. Defense Procurement Amendment 2009 (DPA): A significant improvement
6.1.2. Offset policy to drive defense industrial modernization
6.1.3. Buy and make (Indian) category introduced to promote indigenization of defense related equipment
6.1.4. Private sectors permitted to produce arms and ammunition under the new Draft Arms and Ammunitions Manufacturing Policy (DAAM)
6.1.5. Payment to foreign technology partners does not require governmental approval
6.1.6. Foreign direct investment limited to XX% in the Indian defense sector
6.2. Market Entry Route
6.2.1. Foreign OEMs are forming joint ventures in order to enter the market
6.2.2. India emerges as a key outsourcing hub for global defense companies
6.3. Key Challenges
6.3.1. Offset policy with restricted FDI of XX% is biased towards the domestic public and private sectors
6.3.2. Insufficient information and transparency on future plans
6.3.3. Bureaucracy, corruption, and long project delays
6.3.4. Developing advanced low-cost solutions is essential to gain market share
7 Competitive landscape and Strategic Insights
7.1. Competitive landscape Overview
7.1.1. Domestic public companies have a strong presence in the Indian defense industry
7.2. Key Foreign Companies
7.2.1. Lockheed Martin Corporation - overview
7.2.2. Lockheed Martin Corporation - main products
7.2.3. Lockheed Martin Corporation - recent announcements and strategic initiatives
7.2.4. Lockheed Martin Corporation - alliances
7.2.5. Lockheed Martin Corporation - recent contract wins
7.2.6. BAE Systems Plc. - overview
7.2.7. BAE Systems Plc. - main products and services
7.2.8. BAE Systems Plc. - recent announcements and strategic initiatives
7.2.9. BAE Systems Plc. - alliances
7.2.10. BAE Systems Plc. - recent contract wins
7.2.11. Thales - overview
7.2.12. Thales - main products and services
7.2.13. Thales - recent announcements and strategic initiatives
7.2.14. Thales - alliances
7.2.15. Thales - recent contract wins
7.3. Key Public Sector Companies
7.3.1. Mazagon Docks Limited - overview
7.3.2. Mazagon Docks Limited - main products and services
7.3.3. Mazagon Docks Limited - recent announcements and strategic initiatives
7.3.4. Mazagon Docks Limited - alliances
7.3.5. Mazagon Docks Limited - recent contract wins
7.3.6. Mazagon Docks Limited - financial analysis
7.3.7. Hindustan Aeronautics Limited - overview
7.3.8. Hindustan Aeronautics Limited - main products and services
7.3.9. Hindustan Aeronautics Limited - recent announcements and strategic initiatives
7.3.10. Hindustan Aeronautics Limited - alliances
7.3.11. Hindustan Aeronautics Limited - recent contract wins
7.3.12. Hindustan Aeronautics Limited - financial analysis
7.3.13. Bharat Electronics Limited - overview
7.3.14. Bharat Electronics Limited - main products and services
7.3.15. Bharat Electronics Limited - recent announcements and strategic initiatives
7.3.16. Bharat Electronics Limited - alliances
7.3.17. Bharat Electronics Limited - recent contract wins
7.3.18. Bharat Electronics Limited - financial analysis
7.3.19. Bharat Dynamics Limited - overview
7.3.20. Bharat Dynamics Limited - main products and services
7.3.21. Bharat Dynamics Limited - recent announcements and strategic initiatives
7.3.22. Bharat Dynamics Limited - alliances
7.3.23. Bharat Dynamics Limited - recent contract wins
7.3.24. Bharat Dynamics Limited - financial analysis
7.3.25. Ordinance Factory Board - overview
7.3.26. Ordinance Factory Board - main products and services
7.3.27. Ordinance Factory Board - recent announcements and strategic initiatives
7.3.28. Ordinance Factory Board - alliances
7.3.29. Ordinance Factory Board - recent contract wins
7.3.30. Ordinance Factory Board - financial analysis
7.3.31. BEML - overview
7.3.32. BEML - main products and services
7.3.33. BEML - recent announcements and strategic initiatives
7.3.34. BEML - alliances
7.3.35. BEML - financial analysis
7.3.36. Goa Shipyard Limited - overview
7.3.37. Goa Shipyard Limited - main products and services
7.3.38. Goa Shipyard Limited - recent announcements and strategic initiatives
7.3.39. Goa Shipyard Limited - alliances
7.3.40. Goa Shipyard Limited - recent contract wins
7.3.41. Goa Shipyard Limited - financial analysis
7.4. Key Private Sector Companies
7.4.1. Tata Advanced Systems Limited - overview
7.4.2. Tata Advanced Systems Limited - main products and services
7.4.3. Tata Advanced Systems Limited - recent announcements and strategic initiatives
7.4.4. Tata Advanced Systems Limited - alliances
7.4.5. Tata Advanced Systems Limited - recent contract wins
7.4.6. Mahindra Defense Systems - overview
7.4.7. Mahindra Defense Systems - main products and services
7.4.8. Mahindra Defense Systems - recent announcements and strategic initiatives
7.4.9. Mahindra Defense Systems - alliances
7.4.10. Mahindra Defense Systems - financial analysis
8 Business Environment and Country Risk
8.1. Demographics & Social Statistics
8.1.1. Population - Female
8.1.2. Population - Male
8.2. Economic Performance
8.2.1. Construction Output, Current Prices, Local Currency
8.2.2. Construction Output, Current Prices, US Dollars
8.2.3. Current Account Balance as Percentage of GDP
8.2.4. Exports of goods and services, current prices
8.2.5. Fiscal Balance as a percentage of GDP
8.2.6. Foreign Direct Investment
8.2.7. GDP at Purchasing Power Parity
8.2.8. GDP, Constant Prices (Local Currency)
8.2.9. GDP, Constant Prices (US$)
8.2.10. GDP, Current Prices (Local Currency)
8.2.11. GDP, Current Prices (US$)
8.2.12. General Government Final Consumption Expenditure
8.2.13. Gross Fixed Capital Formation, Current Prices
8.2.14. Imports of goods and services
8.2.15. Inflation, average consumer prices
8.2.16. Interest Rate (Lending)
8.2.17. Manufacturing Output, Current Prices (Local Currency Bn)
8.2.18. Manufacturing Output, Current Prices (US$ Billions)
8.2.19. US$- Exchange Rate (Annual Average)
8.2.20. Wholesale Price Index
8.3. Energy and Utilities
8.3.1. Crude Oil Distillation Capacity
8.3.2. Electricity Exports
8.3.3. Electricity Imports
8.3.4. Electricity Installed Capacity
8.3.5. Fossil Fuels Proved natural gas reserves
8.3.6. Fossil Fuels- Proved oil reserves
8.3.7. Hydroelectricity Installed Capacity
8.3.8. Natural Gas Consumption
8.3.9. Natural Gas Imports
8.3.10. Natural Gas Production
8.3.11. Net Conventional Thermal Electricity Generation
8.3.12. Net Geothermal, Solar, Wind, and Wood Electric Power Generation
8.3.13. Net Hydroelectric Power Generation
8.3.14. Nuclear Electricity Net Generation
8.3.15. Petroleum, Consumption
8.3.16. Petroleum, Production
8.4. Minerals
8.4.1. Coal Consumption
8.4.2. Coal Production
8.5. Social & Political Risk
8.5.1. Political Stability Index
8.5.2. Transparency Index
9 Appendix
9.1. Contact Us
9.2. About SDI
9.3. Disclaimer

- Lockheed Martin Corporation
- BAE Systems Plc.
- Thales
- Mazagon Docks Limited
- Hindustan Aeronautics Limited
- Bharat Electronics Limited
- Ordinance Factory Board
- BEML
- Goa Shipyard Limited
- Tata Advanced Systems Limited
- Mahindra Defense Systems

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