Evolution of Defence Offsets in India and Impact on Aerospace Industry

Author: Naresh Kumar Palta, C.G. Krishnadas Nair

Abstract:
Multiple factors influence needs of defence hardware, including aircraft. Nations have utilized offsets to enhance domestic capabilities and these have become a recognized instrument by 130 countries. Many European nations have obtained 75 to 100 % offsets. Need for India to fully leverage offsets cannot be overstated. Indications are that military hardware requirement could be more than $ 200 billion till 2027. Offsets have taken time to get accepted in India, but with efforts by Aeronautical Society of India, Hindustan Aeronautics Ltd. and Society for Indian Aerospace Technologies and Industries (SIATI), offsets are now key in defence procurements. This study traces evolution of offsets in India and examines impact on aerospace industry. Many private companies that entered Aerospace after economic liberalisation have grown leveraging domestic projects and international sub- sourcing. These have also leveraged offsets due to the credibility created. A good number of companies entered aerospace after introduction of Offsets and have acquired offsets work to grow in technology and products. But numbers of successful companies is small. Joint Ventures by foreign OEMs is another success of Offsets. A domain Survey has brought out perceptions that Offsets have not fulfilled goal of growth. This is a pointer. Long term focus has to be on integration and platform build by requiring vendors to set up factories in India and also asking vendors to partner Indigenous programmes for energizing Make-in-India to build skills, infrastructure and investments. The Government needs to review the gaps in the policy and processes hampering rapid fulfillment of accrued offsets of $11 billion, by addressing concerns of stake- holders, and incentivize them.

Keywords:Aerospace industry, Defence Offsets, DPP, IOPs, Offsets, Make-in-India.

DOI:

International Journal of Trade & Commerce (Vol: 7 Issue:1)