The beginnings of the Indian aerospace industry dates back to 1940 when Walchand

Hirachand set-up the Hindustan Aircraft at Bangalore. The corporation started with a modest
history of building and overhauling monoplanes. History was written in golden words for the
Indian aerospace industry when a Hindustan Aircraft Ltd built ‘Curtiss Hawk P36’ took to
skies on 31st July 1942.

With the onset of the World War II, the establishment was taken over by the allied forces.
Hindustan Aircraft was given a major infrastructural boost. Over the course of the war it was
converted to a mega aircraft overhauling centre by the allied forces. The organization
became one of the biggest aircraft overhauling centres in the Eastern Hemisphere.

Soon after independence the organization was taken over by the Indian government. The
evolving Asian arms race meant India had to master the complex weapon manufacturing
cycles to meet the needs of its armed forces. India set up multiple state-run Public Sector
Undertaking (PSU) corporations to promote defence manufacturing industrial bases.
These PSU’s were designated as manufacturing hubs and they were to be supported
by DRDO laboratories.

By 70’s, Indian aerospace industry was thriving with activity. Aeronautical establishments
were working with zeal to put India on the global map. In July 1970, HAL started the
helicopter division to locally manufacture rotary aircraft. Under this division India mass
produced the Chetak and Cheetah helicopters. To date, these copters serve the armed
forces at some of the most inhospitable conditions.

India’s aeronautical industry entered into a new era when India decided to indigenously
design and develop a fighter aircraft. Thus conceived was the Light Combat Aircraft
(LCA) program that would propel India to the world arena. The Aeronautical Development
Agency (ADA), an independent developmental authority was set-up to as the lead design
and developer for the LCA program. DRDO – India’s premier defence research and
development agency, spruced up its laboratories throughout the country. Dedicated
aeronautical institutions were set-up in and across Bangalore

The Indian aerospace industry has drastically evolved from its modest history of producing a
monoplane to designing and developing the world’s lightest combat aircraft. Marut HF-24 –
India’s first supersonic fighter aircraft was built in a record time of 14 years.
Every Airbus or Boeing aircraft being produced today is partly made in India. Various private
industries have redefined the reach of India’s aerospace capabilities. Catalysts to India’s
growth are the private industries and the government should make renewed efforts in
promoting MSME’s. The Indian aerospace industry is expected to outwit every other regional
competitor and emerge as the world’s largest industry by 2022.
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The Aerospace/Defense Industry serves, as its name represents, two main markets: Aerospace,
which largely comprises the production, sale, and service of commercial aircraft. And Defense, which
is dependent on the nation's need for military weapons and systems designed to operate on land,
sea, and in the air. Also included in this industry is the production of general aircraft (mostly for
business use) and space vehicles, usually satellites, for both military and commercial use.

The Aerospace & Defence Industry in India is a strategically important sector in the country. With the
strength of over 1.3 million active personnel, it is the world’s 3 rd largest military force and has the world’s
largest volunteer army. In recent years the Defence sector has grown extensively with a CAGR of 10%.
India’s defence industry accounts for about 1.6% of the GDP. The allocation of Defence in India’s union
budget is approximately USD 34.53 billion and 31.1% of the defense budget is spent on capital
acquisitions. Imports account to 60% of defense-related requirements and this offers a huge opportunity for
foreign investors. In the next years, the Government target’s to step up local sourcing to 70% and in turn
reduce the defence budget by 50%. The government is currently pursuing the goal of having a turnover of
25.5 billion USD in military goods and services by 2025.

The Aerospace sector in India has had a steady growth in both Defence and Civil Aviation sectors.
Aerospace is predominant to bolster the Defence sector and contributes nearly 50% of the Value of
Production of the sector. With over 300 million in the middle-class income group who can travel at least
once a year by air and India’s growing economy that will boost the traffic trends both in passenger and
cargo, the civil aviation industry in India also offers large growth opportunities.

With a value of about $16 billion the Aviation Industry in India is the 9 th largest in the world and aims to
become the 3rd largest by 2020. The Indian civil aviation market is one of the fastest-growing markets in the
world with travellers increasing at 20% every year and the growth is expected to continue with the plan of
investments of about USD 1.83 billion in the development of airport infrastructure by 2026. The goal for the
upcoming year is to open 15 new airports. The production industry has seen some growth and India is
planning to make its first 2-person aircraft in 2019. There are enormous opportunities for foreign
investments and many global Aerospace and Defence companies are looking at India as a potential low-
cost manufacturing destination and a high potential market.

*3 present

India is already a large commercial and defence aircraft market. With rising passenger traffic and increasing military and defence expenditures,
the demand for aircrafts is expected to increase further. The Indian aerospace industry is one of the fastest growing sectors. India is expected to
become the 3rd largest aerospace industry by 2020.

The current government has brought in significant policy reforms over the last three years. The new Defence Procurement Procedure (DPP
2016) and National Civil Aviation Policy (NCAP 2016) highlight the intent of the government to alter the status quo and that’s a positive sign.

There are several factors driving growth in manufacturing in Indian aerospace industry. These include both macro and micro factors - strong
economic growth that has resulted in rapidly growing domestic aircraft demand, the liberalization of civil aviation policies, offset requirements, a
strong domestic manufacturing base, cost advantages, a well-educated talent pool, the ability to leverage IT competitiveness and a liberal Special
Economic Zones law that provides attractive fiscal benefits for developers and manufacturers.

Regardless of the country’s air navigation policy, India has certainly become a major aerospace hub. India’s aerospace industry growth indicates
that the country is rapidly building capabilities to emerge as a preferred destination to support the global A&D supply chain. With the Government
opening up and providing enormous opportunities to the private sector, many global and domestic players are collaborating and having joint
ventures for manufacturing of aero components, Maintenance, Repair and Overhaul (MRO) facilities for civil and military aviation sectors, besides
overhaul and maintenance of aero engines. India’s MRO segment is estimated to grow at 10 percent and reach USD 2.6 billion by 2021.

Global commercial aircraft fleet is expected to grow at a CAGR of around 4% during 2016-2035. Boeing has forecast a need for over 39,600
aircraft to be added during 2016-2035, with approximately 38 percent deliveries to airlines in the Asian region. Airbus has forecast a demand for
33,070 new aircraft deliveries during 2016-2035. On an average, around 42% of the demand will be for replacement of the existing aircrafts and
58% will be the incremental growth. Single-aisle airplanes will dominate the world’s fleet with around 71% share of new deliveries during 2016-
2035. A majority of these deliveries will be around Asia-pacific region – with India, China, South East Asia and the Middle East being key markets
for the global aircraft majors.

The Indian defence expenditure has increased at a CAGR of 9.7% from 2008-2016, reaching current levels of USD 42.83 bn in 2017-18. The
cumulative capital budget till the end of 12th to 14th five-year plan (2012- 2027) for the Indian Air Force (IAF) is projected to be approximately US
$218 billion; out of which 69 percent is towards acquisition of aircrafts and aero engines. IAF will be spending about US $150 billion on aircraft
and aero engine in the next 15 years, and is expected to grow by 10-15% every year. This indicates a large pipeline of orders in military aircraft
segment, with a growing need for Indian sourcing partners.
 Foreign OEMs will have freedom to choose offset partners over course of contract along with ease of replacement of existing partners, bringing in
more competition and efficiency. For contracts with foreign OEMs under Buy (Global) category, offsets are applicable for contracts above US$
300 Mn (INR 2000 Cr). Existing Offset obligations of foreign OEMs are approximately USD 5 Bn. Offsets for another 10 to 12 Billion USD are in
the pipeline, which will be required to be discharged over the next 8 to 10 years.

Growth drivers

 100% FDI in defence sector: Up to 49% under automatic route; above 49%, through Government route where it is likely to result in
access to modern technology

 The ‘Make in India’ campaign seeks to cut the dependence on imported weapons and positions the country as a hub for defence
manufacturing

 India plans to increase the number of operational airports to 250 by the year 2020

 The FDI policy on Airports permits 100% FDI in Greenfield Projects and 74% FDI in Brownfield Projects under automatic route

 The union budget FY2018-19 has a 7.7% increase in the defence budget

 Commercial aircraft sector is expected to see a growth rate of 4.8% in FY2018-19

 The aerospace defense market is expected to reach more than 23 billion USD by 2024

 The civil aviation industry has registered a growth of 21.2% in travellers

Market status

Market Stats
 India has the 3rd largest armed forces in the world

 India’s main arm suppliers are Russia 62%, US 15% and Israel 11%

 The allocation of defence in the union budget is approx USD 34.53 billion, the 5 th largest defence budget in the world

 About 60% of its defence requirements are met through imports

 India’s current MRO (maintenance, repairs and operations) market size is estimated to be around $750 million.

 India is the world’s fastest-growing domestic aviation market with the Revenue Passenger Kilometre (RPK) growth of
17.5% which was higher than the global average of 7% in 2017.

 More than 80 international airlines connecting to over 40 countries

 Five international airports (Delhi, Mumbai, Cochin, Hyderabad, Bengaluru) have been completed and are operational
under Public Private Partnership (PPP) mode

Key Players in India

International

 Airbus, BAE Systems, Bell Helicopter, Boeing, Dassault, Honeywell Aerospace, GE Aviation, Raytheon, Lockheed
Martin, Rockwell Collins, Sukhoi Aviation , Rolls Royce

National

 Tata Group, Mahindra Group, Reliance Industries, Bharat Forge, Hinduja Group, Hindustan Aeronautics, Taneja
Aerospace