The document provides an analysis of the Indian defence sector. It discusses the history and structure of the industry, including key players like public sector undertakings and the Ministry of Defence. It also examines factors like the budget, production facilities, policies and recent reforms that are driving growth in the sector. Charts on revenues, expenditure and budget over time demonstrate increasing investments and expansion of the industry.
The document provides an analysis of the Indian defence sector. It discusses the history and structure of the industry, including key players like public sector undertakings and the Ministry of Defence. It also examines factors like the budget, production facilities, policies and recent reforms that are driving growth in the sector. Charts on revenues, expenditure and budget over time demonstrate increasing investments and expansion of the industry.
The document provides an analysis of the Indian defence sector. It discusses the history and structure of the industry, including key players like public sector undertakings and the Ministry of Defence. It also examines factors like the budget, production facilities, policies and recent reforms that are driving growth in the sector. Charts on revenues, expenditure and budget over time demonstrate increasing investments and expansion of the industry.
The document provides an analysis of the Indian defence sector. It discusses the history and structure of the industry, including key players like public sector undertakings and the Ministry of Defence. It also examines factors like the budget, production facilities, policies and recent reforms that are driving growth in the sector. Charts on revenues, expenditure and budget over time demonstrate increasing investments and expansion of the industry.
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INDUSTRY
ANALYSIS OF INDIAN DEFENCE SECTOR Presented By: Guided by: Jay Prajapati Dr Maurvi Vasavada Deepak Upadhyay Dhruval Patel CMS-Ahmedabad. Chirag Thakkar • Introduction Of Indian Defence • Factors • Strategic Analysis • Budget Analysis • Conclusion • Recommendations & Future Work HISTORY
• During the early modern period France,United
Kingdom,Netherlands and some states in Germany became self-sufficient in arms production.
• The modern arms industry emerged in the second half of
the nineteenth century as a product of the creation and expansion of the first large military industrial companies • The arms industry, also known as the defense industry or the arms trade, is a global industry responsible for the manufacturing and sales of weapons and military technology. • Itconsists of a commercial industry involved in the research and development, engineering, production, and servicing of military material, equipment, and facilities. • Arms-producing companies, also referred to as arms dealers, defense contractors, or as the military industry, produce arms mainly for the armed forces of states. 1 United States 1 India 2 Russia 2 Saudi Arabia 3 China 3 China 4 United Kingdom 4 Indonesia 5 France 5 Vietnam Department of Defence Airforce,Navy,Army
Department of Defence Ordinance Factory Board,
Production DPSU MINISTRY
OF Department of Defence DEFENCE DRDO R&D
Department of Ex. Serviceman Welfare Defence Industry
The production of defence equipment was, until relatively recently
entirely a government function. The Industrial Policy Resolution, 1948, restricted the entry of the private sector into this industry. In May 2001, the sector was opened for private sector participation, with 100 percent private sector ownership permissible and FDI of up to 26 percent. Foreign companies account for the majority of procurement from the private sector in India, with approximately 70 percent of Indian defence procurement coming from overseas sources. Of the 30 percent of orders placed in India, only an estimated percent is attributed directly to the private sector. Establishment of a new procurement regime Push to domestic industry Simplification of offset regime Increasing involvement of states Maturity in Indian industry Production
Over the years, the Department has established wide ranging
production facilities for various defence equipments through the Ordnance Factories and Defence Public Sector Undertakings . The products manufactured include arms and ammunition, tanks, armoured vehicles, heavy vehicles, fighter aircraft and helicopters, warships, submarines, missiles, ammunition, electronic equipment, earth moving equipment, special alloys and special purpose steels. • HINDUSTAN AERONAUTICS LIMITED (HAL) • BHARAT ELECTRONICS LIMITED (BEL) • BHARAT DYNAMICS LTD. (BDL) • BEML Limited • MISHRA DHATU NIGAM LIMITED (MIDHANI) • MAZAGON DOCK SHIPBUILDERS LIMITED (MDL) • GOA SHIPYARD LTD. (GSL) • GARDEN REACH SHIPBUILDERS AND ENGINEERS LTD. (GRSE) • HINDUSTAN SHIPYARD LTD. (HSL) • Private Sector Companies : TATAADVANCED SYSTEMS LIMITED, MAHINDRA DEFENSE SYSTEMS Company’s Name Specialization
Bharat Dynamics Ammunition and Missile systems
Bharat Electronics Avionics
Bharat Earth Movers Transport
Defence Research and Development Research and Development Organization
Ordnance Factories Board Defence Equipment and Support
PEST ANALYSIS
POLITICAL & POLICY
• Government support • Induction of GAAR (General Anti Avoidance Rule) • Political stability, regulatory effectiveness, rule of law and Sovereign debt • Corruption • Regional issues overpowering important country level Economic decisions • Defence Production policy & Defence Procurement Policy • Defence of the country is of highest priority ECONOMICAL
• Major economic reforms done in last 20 years
• One of the fastest growing economy in the world • Increase in defence budget on an yearly average of 8% • One of the highest saving fund • Defence Offset Policy • Recently DEFENCE sector opened for private players with Investment up to 100% and FDI 100% • Largest importer of Arms • Founding member of WTO SOCIAL & LEGAL
• Constant threat from terrorists
• Many international disputes with neighbours • Second largest army of the world • Low cost labour • Pool of second largest English speakers • Large pool of skilled manpower required for Defence industry is available • Better quipped legal system • Highest no. of scientist engineers TECHNOLOGICAL
• Availability of foundations for developing a robust industrial Base in
the defence sector for R&D, MROs (Maintaince Repair and Operations) ie. DRDO, HAL • Indigenized development of Helicopters by (HAL) and Aircraft (LCA/TEJAS) is under progress • Experience of producing robust Defence equipment at low cost • Availability of talent suitable for Defence Industry • Knowledge & Implementation of International Quality Standards required for DEFENCE Industry is available SWOT ANALYSIS STRENGTH
• Government supports very much
• Knowledge and implementation of international quality standards required for Defence industry is available • Better equipped legal system • Adaptability to changed scenario WEAKNESS
• Corruption • Difficulty in starting a business specially in DEFENCE sector • Low innovation • Very long product cycle time as many approvals & checks to be done • Political instability, regulatory in effectiveness, rule of low and sovereign debt • Lack of infrastructure and the increase in energy deficient OPPORTUNITIES
• It is one of the fastest developing market and so the items can be
manufactured as all required resources are available • India is strategically located and developing market of middle east, Asian and Asia can be targeted • Largest number of scientist and engineers • Increase in overseas supplier‘s involvement in Indian defence Industry THREATS
• Strategic barriers for critical techonologies and source codes
• Exchange change risk like Depreciation in dollar • Tough competition from Brazil, China and Russia • Reduction in overall budget • Degradation of India‘s rating by International Agencies PORTER’S FIVE FORCES Threat of new enterants MEDIUM TO HIGH
Bargaining Rivalry among Bargaining power of power of supplier existing competitors buyers LOW TO HIGH HIGH HIGH
Threat of substitute MEDIUM TO HIGH Revenues and Capital
Total Defence Share of Defence
Revenue Capital Year Expenditure Expenditure in GDP (%)
79,146 60,306 1,39,452
2010-11 2.12 (7.0) (10.0) (8.3)
84,686 66,337 1,51,023
2011-12 2.03 (7.0) (10.0) (8.3)
90,614 72,971 1,63,585
2012-13 1.94 (7.0) (10.0) (8.3)
96,957 80,268 1,77,225
2013-14 1.85 (7.0) (10.0) (8.3)
1,03,744 88,295 1,92,039
2014-15 1.76 (7.0) (10.0) (8.4) 120,000
100,000
80,000
60,000 Revenue Capital
40,000
20,000
0 2010-11 2011-12 2012-13 2013-14 2014-15 2.5 Share of Defence Expenditure in GDP (%) 2.4
0 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015 2015-2016 • Rev and Cap of department-wise budget 2012-13 2013-14 2014-15 2015-16 2016-17 Actuals (Rev+ Cap)
Army 91450.51 99464.21 119434.94 130658.33 1,39,700.43
Navy 29593.53 33393.21 32442.86 40528.88 39,424.88
Air Force 50509.13 57708.63 53896.54 56686.84 53,451.25
DGOF 267.86 1298.39 2332.89 3644.30 1,953.29
DGQA 695.67 766.02 815.58 850.16 975.37
R&D 9794.80 10868.89 13447.19 14358.49 13,593.78
2010-11 • Due to rising social and political tensions in different parts of the country, there is far greater need for inclusive growth. • Considering the security environment in and around India, the government will have to provide more funds under the Capital budget required for modernization of forces. • Thus, Defence authorities will have to work out how to function with a minimal increase in the Revenue budget. 2011-12 • The growth in the defence budget has provided extra resources, particularly for the modernization of the armed forces. 2012-13: • The increase in the latest defence budget was made possible by the expansionary fiscal policy adopted by the government in general. Further, although the increase looks impressive at first glance, it is not however driven by the modernization needs as much as by manpower needs. • The surrender of funds under such critical heads and of such magnitude not only reflects poorly upon budgetary management and the procurement system, but is also a cause of concern given the huge gap in national military capability and the rapid modernization in neighbouring countries. • China which is pursuing an unprecedented level of military modernization with a double-digit annual increase in defence expenditure for two decades.
2013-14: •A mismatch of huge proportions is expected in the coming years between the allocation to and expectation by the defence ministry. • One of the paths that the Ministry of Defence is now expected to take is to rework its future expenditure based on the current reality. This would mean a bit of reprioritization of its main items of expenditure. 2014-16:
• The latest defence allocation comes in the wake of the Modi
government’s all-out push for the ‘Make in India’ initiative, the ‘heart’ of which, as noted by the Prime Minister himself at the Aero India 2015, is the defence industry. • The modest increase would most likely enlarge the already huge gap existing between the MoD’s resource requirement and the allocation made in successive budgets. • The stagnation of capital expenditure, which is crucial for building new capability, would further delay the on-going modernization process. • From both the short- and long-term perspectives, this is a major cause of concern for sectors like defence, which are completely dependent on the central government for their resource requirement. • The 2015-16 defence budget is also disappointing on account of the lack of a defence-specific ‘Make in India’ initiative. • As India is moving towards transformation from a regional power to a global power, the Defense sector is increasingly occupying even bigger space in the country’s long term strategic planning. • Indiais gaining power it is increasing its purchasing power as well with several high-end Defense deals either in the pipeline or being envisioned to strengthen India’s force structure. • Asan emerging economic superpower, India’s spending on Defense is on a rapid upward trajectory. • The main driver appears to be emerging rivalry with China – especially as Beijing seeks to increase its presence in the Indian Ocean. • However, traditional rivalry with Pakistan as well as increasing internal security issues are also factors. • indian defense industry\Project\images\india-outline- map.jpg • With skilled intensive manufacturing capabilities and a world class IT base, India has the right ingredients to become a key link in the global defence supply chain. • The defence opportunity is a win-win situation for the country. • With stronger focus on IT, high tech engineering and research and design capabilities, India can leverage its IT infrastructure and manufacturing potential to be one of the key global sourcing destinations for defence systems and equipment. Make in India Rising up to the huge expectation generated since the launch of ‘Make in India’ initiative in September 2014, the Union Budget has made a number of provisions to incentivise Indian industry, particularly the manufacturing sector. Make in India - Defence.mp4
REASONS TO INVEST • India’s current requirements on defence are catered largely by imports. • The opening of the defence sectorfor private sector participation will help foreign original equipment manufacturers to enter into strategic partnerships with Indian companies and leverage the domestic markets as well as aim at global markets. • The offset policy introduced in the capital purchase agreements with foreign defence players. It would also ensure that an eco-system of suppliers is built domestically.
• Favorable government policy which promotes self-reliance,
indigenisation, technology upgradation and achieving economies of scale including development of capabilities for exports in the defence sector.
• The country’s extensive modernization plans with an
increased focus on homeland security and India’s growing attractiveness as a defence sourcing hub.
