A bright future for India’s
The stars might be aligning for India’s defense sector. Here’s what the government and industry can do to seize the moment.
Brajesh Chhibber and
India’s defense industry, which has grown
will have to learn to manage some uniquely
substantially in recent years, seems headed for
even better days. Growth in domestic demand
should continue to be robust, the government has
To build tomorrow’s industry, India’s Ministry
a clear vision for an indigenous defense indus-
of Defence and its contractors might look to
try, the country’s attractiveness to global defense
mature markets such as France and the United
companies is rising due to shrinking global
Kingdom, as well as to developing markets
defense budgets, and there is tremendous export
such as South Korea, and apply some of the ideas
potential in engineering services and compo-
pioneered there. One essential move is to decide
on core capabilities and focus efforts on building
these in India. Other steps include improving
The way forward is not without some signifi-
the talent market, building skills in the govern-
cant obstacles, however. In particular, the
ment and private companies, and ensuring
government’s new purchasing procedures must
open and inclusive access to defense markets.
prove their mettle, and broadening and
shifting the nation’s strategic alignments will be
If the government and its partners embrace the
challenging. For their part, defense firms
challenge, India in 2020 will have a vibrant
A bright future for India’s defense industry?
industry capable of meeting not only its domestic
noncompetitive, bilateral agreements. These
needs but also the needs of other nations. That
accounted for approximately 70 percent of
would give India a greater degree of self-reliance,
the total from 2000 to 2010. India increasingly
of course, and contribute to a stronger trade
looked beyond its traditional supplier, Russia,
balance and substantial job creation.
for weapons procurement and began to include
France, Israel, the United Kingdom, and
A decade in review
the United States in the mix. However, even with
India’s defense market saw robust growth over the
increased purchases, equipment levels in
past decade. Government capital spending
several key categories have declined over the last
quadrupled from $3 billion in 2000 to $12.2 billion
decade due to rising obsolescence and delayed
in 2010.1 By this measure, India was the sixth-
procurement (Exhibit 1).
biggest spender on defense worldwide from 2000
McKinsey on Defense 2013
Exhibit 1 of 6
Most capital spending was done through intergovernmental purchases, which are typically
These intergovernmental purchases often include
are licensed to produce the contracted equip-
a significant role for defense public-sector
undertakings (DPSUs)2 —Indian companies that
Inventory has declined for several platforms.
Count of equipment
Some platforms have seen growth . . .
. . . while others are being depleted
(Air Force and
surface-combatants category includes destroyers, frigates, and corvettes, but not submarines.
Source: The Military Balance, The International Institute For Strategic Studies, 2000 and 2011 editions
McKinsey on Government Spring 2013
McKinsey on Defense 2013
Exhibit 2 of 6
The Defence Procurement Procedure, or DPP,
guides standard procurement.
Indian defense purchasing...
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