Indian Defence Market Becomes More Competitive as New Delhi Promotes Local Firms

 In Data Stories

The Indian defence market is the fifth largest in the world at over $53 billion—is also one of the most competitive.

Local firms currently account for one-third of Indian defense procurement. Supported by the government’s “Make in India” initiative, the local share of defense investment is set to grow over the next five years.

The rest of the Indian defence market is highly fragmented, and the armed forces field systems from several different countries. The inventory of the Indian Air Force (IAF), for example, includes:

  • Russian MiG and French Rafale fighters,
  • American C-17 and C-130 transport aircraft, and
  • Israeli Heron UAVs

Russian firms, long dominant in the Indian defence market, have seen their market share reduced in recent years. However, a $3.2 billion contract for four S-400 surface-to-air missile systems will bolster its position through 2023.

France, currently India’s largest source of defense imports thanks to an $8.6 billion contract for 36 Rafale fighter aircraft, will likely fall behind Russia in the coming years.

While Israeli firms make up the majority of India’s unmanned aerial systems (UAS) and weapons procurement, American defense primes have had success addressing Indian requirements for transport aircraft and attack helicopters.

One of the most pressing tasks for Prime Minister Narendra Modi’s new government will be to address the Air Force’s shortfall in fighter aircraft. Despite the 2016 purchase of 36 Rafale fighters, the country still has a requirement for over 110 more.

It’s current fleet of MiG-21 and MiG-27s will be retired over the next five to ten years, leaving India with at most 30 fighter squadrons—twelve short of a stated requirement for 42 squadrons to face nuclear-armed neighbors China and Pakistan.

Contenders for the $13 billion opportunity include Lockheed Martin’s F-21, Boeing’s F/A-18E/F, Rafale, the Eurofighter Typhoon, Russian Su-35s and MiG-35s, and Saab’s Gripen.

The India-Pakistan crisis earlier this year, in which the Pakistan Air Force shot down an IAF MiG-21, highlighted the importance for New Delhi of reinforcing its air posture.

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