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.
At present, India’s defence industry accounts for about 1.6% of the GDP. In fact, India has the 5th largest defence budget in the world. The allocation of Defence in India’s union budget 2017-18 stood at USD 41 billion. Out of this, USD 13.3 billion i.e., 31.7% of the defence budget is spent on capital acquisitions. Budget 2017-18 has seen a 5.3% increase in defence allocation as compared to budget 2016-17.
About 70% of the defence requirements are met through imports. Imports account for a major portion of defence-related requirements and this offers a huge opportunity for foreign investors. In the coming years, the Government targets to step up local sourcing to reduce the defence budget by a significant number. The government is currently pursuing the goal of having a turnover of 25.5 billion USD in military goods and services by 2025.
In the last five years, we have seen a rapid growth of airlines and passenger traffic in India at over 15% per year. Additionally, the number of passengers travelling from India to international destinations is also estimated to be around 100 million a year. This further signifies high demand for airline services in the coming years. In fact, the civil aviation sector in India is growing rapidly. It has recorded an annual growth of over 41% in passenger traffic.
With a value of about $16 billion, the Aviation Industry in India is the 9th largest in the world. It further aims to become the 3rd largest by 2020. The Indian civil aviation market is one of the fastest-growing markets in the world. It has travellers increasing at 20% every year.
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. There are enormous opportunities for foreign investments. Many global Aerospace and Defence companies are looking at India as a potential low-cost manufacturing destination and a high potential market.
Defence Today: The siloed nature of current solutions across and within the branches of the armed forces makes difficult effective data gathering, dissemination, and decision-making — all of which are slowed by multiple layers of analysts, aggregations and handovers. As a result, the level of detail and accuracy tends to degrade before information reaches a decision maker. At the same time, the complexity and cost of defence platforms continue to rise, drawing public attention and dissuading top decision makers from using them, even as environments in which conflicts take place require the extreme precision that new, more expensive solutions offer. These challenges are aggravated by the asymmetric nature of threats.
Our increasing reliance on connectivity, automation and computing exposes our assets to cyberrisks. These vulnerabilities exacerbate the threat picture, as cyberattacks are often inexpensive to mount yet can cause massive damage and can be difficult to pre-emptively defend against.
Defence Tomorrow: The future of Aerospace and Defence is going to be shaped by a variety of technological, economic, social and regulatory trends, in addition to shifting industry dynamics.
A combination of trends and unpredictable happenings are likely going to affect the demand for a variety of new technologies and use cases in the Aerospace domain. But for many of these use cases to become part of daily life, their underlying technologies must first achieve widespread acceptance.
The underlying technologies for air taxis may reach sufficient maturity by 2050. Battery capacity and efficiency may be adequate, vertiports may be plentiful and unmanned aircraft system traffic management (UTM) may be robust and resilient. But the market for air taxis won’t take off before regulators and consumers are convinced that they’re safe.
In the Midst of Covid-19
The aerospace and defence industry has clearly seen the consequences of COVID 19. Historically, the Indian aviation sector has contributed around $ 72 billion to the national GDP. With the ongoing lockdown, even if we assume a 25% decline in aerospace industry revenues, it comes to around $1.5 billion to $2 billion of losses.
In the month of February when the COVID 19 outbreak was slowly progressing, The International Civil Aviation Organization (ICAO) had estimated a 2% decline in international passenger capacity for India. In the month of March when the disease was declared a pandemic, the same estimations went up to a whopping 27%. As per the ICAO and the Airports Council International (ACI) projections (prior to the lockdown period), the Asia-Pacific sector could suffer losses close to $12 billion. However, the loss projection figures given by The International Air Transport Association (IATA) are quite high. Post lockdown, they estimated the aviation industry loss of up to $113 billion.
In order to combat the situation, many state governments have permitted local aerospace and defence manufacturers to resume manufacturing activities with immediate effect.
Ode to the Digital Transformation
Although A&D organizations are leveraging Industry 4.0 technologies, the opportunity exists to implement this more broadly across the enterprise, by focusing on four key areas: becoming agile, building new business models, ensuring close collaboration with the supply chain, and safeguarding data and intellectual property from cybersecurity risks. While there could be many potential pathways to becoming a digitally transformed enterprise, an industry player that leverages intelligent assets to create new products/services and platforms and increase customer engagement can be highly successful.
Industry executives should think of Aerospace & Defence 4.0 as an enterprise-wide investment into driving long-term growth, innovation, productivity, and efficiency. Their approach should be holistic rather than focusing on small random acts of digital. Moreover, since these technologies could be much more sustainable and robust over business cycles, A&D executives should align top leadership, talent, and investments around digital transformation. Being able to completely leverage innovative, game-changing technologies could be a matter of survival in the increasingly “disrupt or be disrupted” A&D industry.