Put off by Austerity Measures, Defence Firms Search for Exit Route - The New Indian Express

Put off by Austerity Measures, Defence Firms Search for Exit Route

Published: 10th February 2014 07:44 AM

Last Updated: 10th February 2014 07:44 AM

It’s a bubble that has burst. India’s dalliance with global arms companies appears to be heading for curtains with India not signing a single new defence contract with foreign firms in the 2013-14 fiscal. Add to it Defence Minister A K Antony’s pessimistic forecast for the next six months on the first day of the defence exhibition Defexpo-2014 on Thursday.

Speaking at the event, Antony said India had no funds for new defence acquisitions this fiscal after Rs 7,870 crore from the capital budget was transferred to the revenue budget to meet rising expenses relating to salaries and pensions, fuel costs and maintenance. That decision has effectively brought down the capital budget for 2013-14 to Rs 78,871 crore from the allotted Rs 86,741 crore.

The domestic and global defence industry has interpreted this statement from Antony to mean India would not sign any defence contracts due to its economic troubles and austerity measures for the next six to eight months.

Major global defence firms are now recasting their plans for India, with some of them stopping their expansion plans, others applying brakes on their campaign in tenders and some others reworking their strategies, industry insiders, who do not wish to be named, told Express. Industry sources said US firm Boeing, which emerged as one of the largest defence suppliers to India from the US with contracts worth Rs 35,000 crore in the last five years, will now focus on “deliveries” of planes and missiles that it has signed contracts for over the next six months, instead of signing new contracts.

Industry sources said US firm Raytheon has already begun re-evaluating its presence in India and its expansion plans may not go through.

The development regarding the AgustaWestland deal for 12 VIP helicopters too hasn’t helped, after the Defence Ministry decided to keep it out of the Defexpo, despite no court passing any strictures or judgment on the corruption case it is fighting in Italy and the CBI investigation here yet to completed, the industry sources added.

Read more: Boeing to Focus on Delivery Instead of Fresh Bookings

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