The air force is also likely to take delivery of the two remaining Embraer 145 AEW&C aircraft on order from Brazil's Embraer Defense and Security toward year-end. India received the first last August under an agreement worth more than $200 million signed in 2008 to jointly integrate the indigenously developed AEW&C systems onto three of the modified regional jets. The aircraft carries the Indian Active Array Antenna Units developed by the Defense Research and Development Organization (DRDO).
The Indian government is expected to choose the winner of a 197-helicopter competition this year. The Eurocopter AS350 Fennec and Russian Kamov Ka-226 Sergei are vying for the contract expected to be worth over $2 billion. The army will take delivery of 133 of the helicopters and the rest would go to the air force.
Moreover, India may sign a final deal with Airbus Military to supply A330 MRTT Multirole Tanker Transport for its new midair refueling tankers. “Detailed negotiations will now begin, which is expected will lead to the award of a final production contract for an envisaged six aircraft in 2013,” an Airbus Military official says.
The twin-engine MRTT was competing with the Russian Ilyushin IL 78 Midas; the air force operates six IL 78 refuelers now. The Airbus Military official estimates the value of the project is about $1.55 billion.
The defense outlay for the current fiscal year, which ends March 31, constitutes 1.9% of the country's gross domestic product (estimated to be 101.6 trillion rupees), a marginal increase from the 1.83% of the GDP in 2011-12.
As one of the largest defense equipment markets in the world, India is expected to spend about $120 billion on capital acquisition alone during the next five years.
“We are in one of the world's most dangerous regions, with two nuclear-armed neighbors,” the Indian defense ministry official says. “The rising military might of China and threats from Pakistan, along with an underdeveloped aerospace industry, have by default made us the world's leading weapons importer.”
Meanwhile, a report by Deloitte Aerospace & Defense on the 2013 outlook says India is poised to become a favorite destination for global defense sector players with total offset opportunity for the commercial segment in the country set to cross the $10 billion mark this year. According to the report, while the global defense industry is expected to shrink, India continues to be one of the promising A&D markets in the world, due to its armed forces' increasing demand for A&D equipment.
“Due to the huge offset requirement and the Indian government's objective of building up an indigenous manufacturing base, the global industry has an opportunity to integrate with the Indian industry to set up their manufacturing lines in India,” says Nidhi Goyal, director at Deloitte India. “This could be achieved either through joint ventures or collaborations.”
While the Indian defense market is providing new opportunities for foreign defense companies, the government is well aware of the importance of building up its internal industrial defense base. As a result, it has introduced stringent offset requirements and insists on transfers of technology under the Defense Procurement Procedures. It recently announced a new strategy, “Buy Indian, Make Indian,” in an effort to keep production local.