Indian Defense Market, Forecast to 2026

New Policy Dynamics, Market Requirements, and Programs Present Myriad Opportunities for Companies

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According to SIPRI, India was the largest arms importer in the world during 2011–2015. The Indian government has revised the procurement policy after seeking responses from industry stakeholders. Frost & Sullivan has analyzed the competitive landscape of defense in India, which consists of public sector undertakings (PSUs), foreign defense companies, and emerging Indian companies. The Indian Armed Forces have not been able to spend the entire defense budget allocated, owing to straitjacketed procurement procedures and inherent delays; and the gap between allocated and actual defense spending has been increasing over the years. Frost & Sullivan expects the underspend in defense to decrease during the forecast period, as the government modifies policies to simplify procurement. Reduced underspending will drive defense budgets and the market will expand.

While the three services have had several modernization plans under way, some of these have been stalled due to the lack of clarity and coherence in procurement. The Indian government seeks to address this through the new Defense Procurement Policy (DPP) 2016 that is aimed at streamlining procurement and giving more leeway to suppliers, opening up Foreign Development Investment, allowing single vendor participation for tenders, and initiating a “Strategic Partner” model.

The government is outlining policies to convert India into a defense hub, with indigenous manufacturing being given the highest priority. Defense exports will be permitted and foreign direct investment (FDI) holdings have been tweaked to enable more foreign original equipment manufacturers (OEMs) to set up ventures in India. Several multi-billion dollar projects are expected to come to fruition. While a few of these projects will be executed through government-to-government (G2G) and off-the-shelf purchases, the majority will be through partnerships between indigenous companies and foreign OEMs. Offset regulations are being relaxed to speed up procurements and provide flexibility for suppliers while approaching tenders. The focus is on fast-track deals, tailored projects with Indo-foreign OEM partnerships, and involving micro, small, and medium enterprises. As per the Defense Procurement Policy 2016, the way ahead for India is by developing indigenous capabilities in defense through foreign collaboration. This is a critical time for foreign OEMs. The decisions made now, in terms of partnerships with emerging Indian firms, leveraging key clauses in the Defense Procurement Policy 2016 and understanding the track of Indian modernization, will help them win contracts and reap benefits. The report presents certain insights necessary to help companies proactively establish themselves in a position of competitive advantage in India.

The expanding Indian Defense Market is at an inflexion point. Companies should be cognizant of changes in procurement policy brought out through the revised defense procurement policy 2016 (DPP 2016) in order position themselves at a competitive advantage. The new policy presents latent opportunities that firms can take advantage of in order to establish themselves in one of the largest defense markets in the world. Platform obsolescence and extensive defense modernization (underway and planned) makes India a key market for defense equipment. There will never be an absence of demand. The changes brought about by “Make in India” and the “Defense Procurement Policy 2016” can be used to a OEMs advantage to gain a firmer foothold in the market. By expanding partnerships with emerging Indian defense companies, utilizing India’s vibrant micro, small and medium enterprise (MSME) sector and leveraging new policy measures a defense company can place itself in a position to successfully compete and win contracts in India.

Table of Contents

Indian Defense Market, Forecast to 2026Executive SummaryKey FindingsCEOs’ PerspectiveKey Questions this Study will AnswerIndian Defense Market AnalysisCountry OutlookCountry Outlook—External ChallengesCountry Outlook—Internal ChallengesDrivers and RestraintsMarket DriversDrivers ExplainedDrivers Explained (continued)Drivers Explained (continued)Drivers Explained (continued)Drivers Explained (continued)Market RestraintsRestraints ExplainedRestraints Explained (continued)Restraints Explained (continued)Restraints Explained (continued)New Developments, Procurement Stakeholders, and PoliciesDevelopments in the Indian Defense IndustryDevelopments in the Indian Defense Industry (continued)Developments in the Indian Defense Industry (continued)Procurement and DPP 2016Procurement Process and Decision MakersProcurement and Offset DynamicsProcurement Categories and FDI NormsNew Procurement Policy and Industry ImplicationsNew Procurement Policy and Industry Implications (continued)Procurement CategoriesDefense Budget ForecastDefense Budget Spending AnalysisDefense Spending Projections—Business as Usual ScenarioDefense Spending Projections—Active Implementation ScenarioIndustry Landscape and Partnership Road MapChanging Industry LandscapePartnership Road MapPartnership Road Map (continued)Partnership Road Map (continued)Defense Technology Road Map and OpportunitiesDefense Technology Road Map and Opportunities—GeneralDefense Technology Road Map and Opportunities—General (continued)Defense Technology Road Map and Opportunities—General (continued)Defense Technology Road Map and Opportunities—General (continued)Defense Technology Road Map and Opportunities—General (continued)Defense Technology Road Map and Opportunities—General (continued)Defense Technology Road Map and Opportunities—Air WarfareDefense Technology Road Map and Opportunities—Air Warfare (continued)Defense Technology Road Map and Opportunities—Air Warfare (continued)Defense Technology Road Map and Opportunities—Land WarfareDefense Technology Road Map and Opportunities—Maritime WarfareDefense Technology Road Map and Opportunities—Maritime Warfare (continued)Defense Technology Road Map and Opportunities—Marine EngineeringDefense Technology Road Map and Opportunities—Marine Engineering (continued)Defense Technology Road Map and Opportunities—Marine Engineering (continued)Case StudiesCase Study—Incentivizing Development of DefenseCase Study—Developing Indigenous CapabilityCase Study—Indian and Foreign OEM PartnershipModernization Programs TrackerKey Modernization Programs TrackerKey Modernization Programs Tracker (continued)Key Modernization Programs Tracker (continued)Key Modernization Programs Tracker (continued)Key Modernization Programs Tracker (continued)Key Modernization Programs Tracker (continued)Key Modernization Programs Tracker (continued)Key Modernization Programs Tracker (continued)Key Modernization Programs Tracker (continued)Competitive Landscape—Key Established ParticipantsCompetitive Landscape—Foreign ParticipantsCompetitive Landscape—Foreign Participants (continued)Competitive Landscape—Foreign Participants (continued)Competitive Landscape—Foreign Participants (continued)Competitive Landscape—Foreign Participants (continued)Competitive Landscape—Foreign Participants (continued)Competitive Landscape—Government ParticipantsCompetitive Landscape—Government Participants (continued)Competitive Landscape—Government Participants (continued)Competitive Landscape—Emerging Indian CompaniesCompetitive Landscape—Emerging Indian Companies (continued)Competitive Landscape—Emerging Indian Companies (continued)Competitive Landscape—Emerging Indian Companies (continued)Competitive Landscape—Emerging Indian Companies (continued)Growth OpportunitiesGrowth Opportunity—Leveraging Partnerships: DPP 2016Growth Opportunity—Multiple Bids: DPP 2016Growth Opportunity—Leveraging Micro, Small, and Medium Enterprises (MSME): DPP 2016Growth Opportunity—Enhanced Performance Parameters: DPP 2016Growth Opportunity—New CapabilitiesStrategic Imperatives for Success and Growth Conclusions and Strategic RecommendationsConclusions and Strategic RecommendationsLegal DisclaimerThe Frost & Sullivan StoryThe Frost & Sullivan StoryValue Proposition: Future of Your Company & CareerGlobal PerspectiveIndustry Convergence360º Research PerspectiveImplementation ExcellenceOur Blue Ocean Strategy

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