The Indian aerospace industry is one of the fastest growing aerospace markets in the world. With a long history spanning six decades, the country has an excellent pool of resources matching global standards. India’s liberalised economy offers sound opportunities for international companies look to outsource manufacturing and MRO activities.

Globally, India’s position in civil aviation improved from tenth to ninth position in 2007. Air traffic has been growing at almost 25% annually. The country has been upgrading its airports to international standards, catering to heavier cargo and passenger traffic.

It is in the space industry that India has made even more significant strides – it is one of the six countries in the world that undertakes space launches with commendable work put in by Indian Space Research Organisation (ISRO) through its commercial arm, Antrix.

• The genesis of research and development capabilities of the country lie in the establishment of the institutes like Defence Research and Development Organisation (DRDO)
• Indian Institute of Science in Bangalore and Council for Scientific Industrial Research (CSIR) offer opportunities in research and training for aeronautical graduates
• The Aeronautical Society of India formed a platform where engineers, industrialists and professionals could work together for the industry
• ISRO has successfully operationalised two major satellite systems namely Indian National Satellites (INSAT) for communication services and Indian Remote Sensing (IRS) satellites for management of natural resources. Polar Satellite Launch Vehicle (PSLV) for launching IRS type of satellites and Geostationary Satellite Launch Vehicle (GSLV) for launching INSAT type of satellites are some of the Indian space programme‘s notable successes.

Private airlines now account for 75% of domestic aerospace market. Opening up the skies led to a boom in air traffic, both passenger and freight, which was reversed in 2008 with the global slowdown. However, as the graph below shows, recovery has begun and the aviation sector is set to continue on its high growth trajectory. The Future: Going ahead, growth in air traffic is expected to outperform the global average till 2025. In military aviation, India is expected to spend about $35 billion over the next 20 years as it replaces its existing fleet.

Indian MRO segment has been growing at 11 percent and has not been affected significantly by the slowdown. This market is expected to grow at an average of 10% and reach $ 2.6 billion by 2020. The Government recognises the need for massive investment to meet these growing needs:

• The Ministry of Civil Aviation estimates investment of $ 200-300 billion over the next 25 years, till 2034.
• The Airports Authority of India has planned investment of $ 3.04 billion to upgrade airports across the country, even as the sector is open for public-private partnerships (PPPs).
• According to Boeing, India needs 856 airplanes worth $ 72.6 billion over the next 20 years to meet the surging demand.
• Investments in the Indian Space Programme to the tune of Rs. 39,750 crores during the period 2007-2012, under the Government’s Planning Commission programmes.

Policy initiatives: The Indian Government has liberalised the framework for operating in the aerospace industry considerably:

• Manufacturing and R&D activity is allowed 100% Foreign Direct Investment on automatic route in all areas, except air traffic services.
• While 100% domestic private investment is allowed in the defence sector, there is a limit of 26% FDI in the manufacture of defence equipment, which is also subject to licensing requirements.
• 100% FDI permitted under automatic route for MRO, flying training institutes and technical training institutes.
• 100% tax exemption for airport projects for a period of 10 years.
• Defence Offset Policy, effective from September 2008 has a mandatory offset requirement of a minimum of 30% for procurement of defence equipment in excess of Rs. 3 billion, only direct offsets are allowed, banking of direct offset credits permitted for up to two years, transfer of technology not counted towards offset calculation and vendor is free to choose Indian offset partner.
• Tax incentives are given for investing in Special Economic Zones.

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