Oct 21, 2010
| By Neelam Mathews firstname.lastname@example.org |
| U.S. defense companies are now increasingly looking to India to establish partnerships for product design, making the country a part of their global supply chain, according to a new report from consultancy KPMG.|
Released ahead of President Barack Obama’s visit here in November, the report focuses on the improving landscape for U.S. business and Indo-U.S. commercial enterprises in the Indian defense sector.
It also highlights the growing proximity between the defense establishments of the two countries, given the increased warming of political relation.
This warming is apparent given recent Indian defense awards to U.S. companies, many of which come under the U.S. foreign military sales (FMS) program. In 2008, India contracted for six Lockheed Martin C-130J Hercules aircraft for $1.1 billion. The country also has ordered 12 Boeing P-8I maritime surveillance aircraft worth over $3 billion, ultralight howitzers worth $647 million, F414-GE-INS6 engines for the Light Combat Aircraft valued at $650 million and Harpoon anti-ship missiles worth $170 million.
Together, these deals have created offset obligations of over $1 billion, which now account for 42% of all international offset obligations created since India’s Defense Procurement Policy made them mandatory - as well as creating significant opportunities for collaboration between Indian and U.S. firms. And this list is poised to expand with more orders for U.S. helicopters, C-17s, weapons and Awacs aircraft.
The report indicates that U.S. defense industry players are increasingly looking to the East to establish manufacturing bases to take advantage of the region’s growing engineering design and low-cost manufacturing capabilities.
“The natural synergies at work here cannot be overlooked by U.S companies entering the defense manufacturing space in India,” says Martin Phillips, global head of aerospace & defense for KPMG. “These companies stand to attain exposure to the rapidly growing defense procurement budget of a strategic partner. The benefit to the Indian industrial base would be in the form of upgrading of domestic infrastructure, capacity addition and research and development activities.”