BMI View: India is one of the biggest defence spenders globally. The country
has one of the world's largest armed forces - much of which requires
modernisation - and faces a range of external and internal security threats that
drive investment into military personnel and equipment including terrorism,
insurgencies, tensions with neighbouring Pakistan, and China's growing assertion
in the region. India remains reliant on imports to meet much of its armed
forces' requirements for technologically advanced equipment; however, amid
efforts to develop and expand the local defence industry under Prime Minister
Modi's 'Make in India' initiative, we expect the country's huge defence trade
deficit to gradually narrow over the coming decade.
■ India's FY2016-17 budget proposal, announced in February 2016, amounts to INR2.49trn (USD36.6bn), a moderate y-o-y increase in local currency terms. Of the total, 52% of spending (excluding pensions) has been allocated to the army, while the air force will receive 33%, the navy 16%, and the Defence Research and Development Organisation (DRDO) 5%.
■ In April-December 2015, the Indian government reported a 39% y-o-y increase in defence exports to
■ According to figures from the Indian defence ministry reported by TASS, Indian contracts for Russian defence equipment exceeded USD5bn in the last three years (up to 2015), compared with USD4.4bn for the US.
■ As per the recently signed US-India defence cooperation agreement, the US is currently negotiating the transfer of 30-40 defence-related technologies to India.
■ BEL-Thales Systems Limited (BTSL) is jointly developing a fire-control radar, named Pharos, with Thales Netherlands as per an agreement signed in March 2016.
■ India and Russia resumed discussions to jointly develop a fifth generation fighter jet in February 2016.
■ The Indian MoD is working to modernise state-owned naval shipbuilders in order to enhance their
productivity and speed up delivery of vessels. On March 8 2016, the ministry stated it had spent USD373mn on modernising four shipbuilders (MDL, GRSE, GSL and HSL).
BMI Industry View ... 7
Table: Headline Defence Expenditure Forecasts (India 2016-2020) . . . 7
SWOT .... 10
Industry Forecast .. 11
Defence Expenditure . 11
Table: Defence Expenditure (India 2014-2019) . . . . 11
Table: India (Defence Expenditure 2020-2025) . . . . 12
Defence Trade 13
Industry Risk Reward Index ... 16
Defence Industry Risk Reward Index ........ 16
Table: Asia Pacific - Defence Industry Risk Reward Index . . 16
Rewards ........ 16
Risks .... 17
Market Overview ... 18
Defence Market Overview .... 18
Domestic Defence Sector .... 18
Domestic Defence Market ... 22
Armed Forces Overview ....... 24
Armed Forces . 24
Table: Armed Forces Personnel (India 2008-2013) 25
Table: Indian Armed Forces (IAF) - Overseas Deployments . 25
Security Overview .. 26
Domestic Threats ..... 26
Regional Threats ...... 28
Company Profile .... 30
BAE-HAL ........ 30
Bharat Dynamics (BDL) ...... 32
Bharat Electronics (BEL) ..... 33
Hindustan Aeronautics (HAL) ........ 35
Honeywell International India ........ 37
Ordnance Factories (OF) ..... 38
Rolls-Royce International ..... 39
Methodology . 40
Risk/Reward Index Methodology ... 40
Sector-Specific Methodology ........ 41
Table: Defence Risk/Reward Index Indicators 41
Weighting ...... 42
Table: Weighting of Defence Risk Reward Index . . . 42
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