Growing domestic demand for civil as well as military aircraft coupled with the defense offsets is fuelling the growth of the Indian aircraft manufacturing and services industry. Beating back spirited competition from Latin America, India remains an attractive low-cost manufacturing destination with a huge engineering talent pool and proven IT capabilities. However, the domestic industry has stay on its toes to remain the manufacturing hub of choice.
New analysis from Frost & Sullivan (aerospace.frost.com), Strategic Analysis of Indian Aircraft Component Manufacturing and Services Industry, finds that the industry earned revenues of $2.09 billion in 2010 and estimates this to grow at a compound annual growth rate of more than 16 percent to reach $4.56 billion in 2015.
The Indian industry's lack of MRO companies with globally recognized certifications and inadequate expertise in providing end-to-end solutions could narrow the gap between the Indian industry and some of the low labor-cost Latin American countries, primarily Mexico and Chile.
"North American aerospace companies prefer to set up their low-cost base in South America due to the lower wages, initiatives by a proactive government, bilateral aviation safety agreements with the United States, increasing talent pool, and geographical vicinity," says Frost & Sullivan Research Associate Aditya Desai. "India is hoping to retain its edge in the global market by leveraging its Defense Procurement Offset Policy, which is expected to bring in manufacturing orders from global defense firms."
The Government's inclusion of civil aerospace products in the offset eligibility list will widen the spectrum of outsourced work and extend the benefits to a larger section of domestic industry participants. Government spending on foreign procurement as a part of armed forces modernization also creates huge offset opportunities.
"The Government is expected to spend approximately $54 billion on defense procurement from foreign vendors during 2011-2015," notes Desai. "As a part of a 30 percent offset, winning vendors are anticipated to source components and/or services worth $18 billion from the Indian aircraft component manufacturing and services industry."
Further, the offset policies could potentially generate $40.00 billion over the next 20 years. This will open doors for Indian manufacturers that are keen to enter the high-tech arena of aerospace manufacturing and offer them guaranteed returns on their investment.
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