Why Global Defence Companies Are Eyeing India for Manufacturing
Every day, you must be hearing that these European companies will make their weapons in India. That European company will make it. Even Rafale has not made its fuse anywhere because France has never transferred technology. But it is saying that we will make our fuse inside India itself. We are not talking only about European companies. If we expand it a little more, you will find that the United States of America’s Ludwig Martin is producing many of its products inside India. Russia’s Sukhoi fighter jets are being made inside India. And even in the coming time, more offerings are being made to India. The question arises that this type of offloading is being done by defense companies from all over the world, and their manufacturing is being shifted to India. So the question arises, why and in what way is this happening? I, Shubhik Chauhan, will discuss this with you in detail. Come on, friends, now let’s try to understand what happened here. Shorten with AI
Global Defence Production Shift Towards India
If I tell you how companies from all over the world are constantly shifting their production to India,
- First, look at Airbus. Airbus has already negotiated to make C295 transport aircraft in India through a joint venture with Tata Advanced Systems Limited. Manufacturing facilities are being started.
- On the other hand, much of the equipment of Rafale will also be made in India by France’s Thales company. Even the fuse of Rafale is being talked about as being produced in India with a tie-up with Bharat Dynamics Limited and BEL.
- On the other hand, the MBDA company of France and the United Kingdom is doing a joint venture with India’s L&T for the next-generation anti-tank guided missile for Indian forces.
- Even Sweden’s Saab company first talked to Adani and then spoke to the Indian forces, and finally, they have offered that Sweden’s Gripen fighter jet be made entirely in India. That is, the German company has started making artillery and vehicle systems in India by tying up. Shorten with AI
In this way, you can see that every day you will get to see such news where some foreign company will say that we will make weapons in India. Lockheed Martin is also making much of the equipment for its fighter jet in India. Russia’s Sukhoi 57 and Sukhoi 30 are being made in India. The offer to make Sukhoi 57 in India is also being given in Nashik. Russia has even signed a deal with India that it can make any weapon it wants in India.
Why India? Key Factors Driving This Shift
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You can think why all these companies, leaving behind 190 countries of the world, want to do production in India only? There are some critical factors behind this.
1. Cost Advantage
The first factor is the cost advantage in India because the production of weapons in India is much cheaper than in Europe and the Western world. Because if you go to Europe or America and ask the cost of an engineer, it is very high. At the same time, they do not even have that much skill. On the other hand, if you look inside India, there are better-skilled people who work at cheaper rates. This is a huge benefit.
2. Offset Obligation
The second thing is that there is an offset obligation in India. What is an offset obligation? Meaning, if I tell you today who is the biggest importer of weapons in the world? The name that will come to your mind is India. Now India has put an essential obligation that if you want to sell weapons to India, then produce them within India.
Like we have Project 15, Project 17, etc. In these, we said that they should be produced within India. Now we have signed a contract for 114 fighter jets and will sign a deal for medium-range fighter jets. What is the essential condition in that, too? Produce them within India.
3. Make in India & Incentives
For this reason, many companies have brought some production to India under this offset obligation and have gradually brought other production capacities as well. And then there are many companies that want a big defense deal to be signed in the future. For this reason, they have already shifted their production facilities to India. Because India’s Make in India project also plays an important role here. Because discounts, etc., are available here. Even in defence, the benefit of the production-linked incentive is available.
4. Export Base & Global Diversification
Along with this, the overall export base of India for exporting goods to the countries of Asia, Africa, and the Middle East is also perfect. Due to this, many companies are shifting to India. Earlier, all the companies were in China, but now they are leaving China and coming to India. This means that global diversification is also playing an important role here.
High-Tech Equipment Manufacturing in India
And due to this, the work of production is being done in India by European companies along with Indian companies through methods like joint venture, technology transfer, subsidiary setup, and outsourcing components where different equipment is being made.
- Airframe structure, which includes wing, fuselage, and engineering components
- Missile sub-systems like seeker head, launch tubes, guidance electronic system, radar, and ionics system
- Parts of an armoured vehicle, and many companies are making armoured vehicles in India
- Naval systems, which include sonar, etc.
That is, high-tech equipment is being made in India. It is not that low-quality equipment is being made in India. Instead maximum parts are being made in India and exported all over the world.
Benefits for India and Challenges Faced
Because of this, India is going to get a significant benefit. First of all, a defense manufacturing hub is being created in India. The MSMEs in India are flourishing even more. Because these MSMEs produce the goods and supply them to these big companies, and then everything is integrated there.
So India’s MSMEs are also moving forward. India’s engineers and work force are able to get more skilled and better jobs in India in this sector. Due to which the defense sector will grow more in the coming time. Private companies are also getting a new experience. Through which, there will be help in making their indigenous weapons within India.
Like L&T worked on missiles earlier, or L&T is saying that we will now make the fighter jet engine ourselves. Mahindra is talking about making the fighter jet engine. So why have all these people come? Because they already have experience, because they have already made many engines, etc.
Due to this, a good capacity is being developed in India, and this industrial capacity is beneficial in times of war.
Challenges
However, the biggest issue that is seen here is that the foreign partners always have a fear of intellectual property in India. Tier two and tier three supplier ecosystems are being created in India. Tier one is rarely seen being made.
Ensuring quality control of global standards is a big challenge. Along with this, political and bureaucratic hurdles are seen in India in defense procurement. Due to all these things, some challenges are being seen.
But despite that, many companies are coming to India in the case of defense, due to which, defense manufacturing is increasing in India. We are breaking records every year in defense exports. So these things are being seen here.
I hope you have understood all these things. If you liked the lecture, then enjoy it. If you liked the lecture very much, then comment below on Global defence.
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