As we enter the New Year, the global Aerospace & Defence (A&D) industry is preoccupied with sorting out critical issues, mainly putting the supply chain in order. Even as the industry was looking forward to a return to normalcy after almost two years of uncertainties due to continuing Covid worries in some countries, and the Russia-Ukraine war earlier in 2022, we are now confronted yet again by the threat of the virus. This has the potential to delay the return to normal. In 2023, the Indian A&D sector will thus have to look inwards for growth and new opportunities.
Atmanirbhar Opportunities
In a way, the stage has already been set, with the slew of steps taken by the Government of India in the recent past. This includes the Atmanirbhar Bharat focus that the Union Budget 2022-23 provides, with 68% of Defence expenditure earmarked for indigenous procurement and 25% of Defence R&D allocated to the private sector.
Karnataka, at the vanguard of India’s A&D sector, accounting for 25% of the country’s aircraft and space industry, 65% of aerospace-related exports and 70% of its supplier base, stands to gain significantly from this.
The state has the advantage of public sector institutions like HAL, BEML, BHEL, GTRE, NAL, DRDO, ADA, ADE, ISRO, IISc etc., coupled with 2,000-odd MSMEs and aerospace component makers, certified and approved by global original equipment manufacturers (OEMs), and has the critical mass to make the most of the emerging opportunities in A&D.
It is significant that the government is committed to almost doubling defence production by 2025 and increasing defence exports to Rs 25,000 crore by 2025. The key to realising this potential will be the ability of the private sector to work effectively with defence PSUs and participate in defence programmes more actively.
Having said that, competition for Karnataka is brewing in states like Telangana and Gujarat, which have laid out the red carpet for domestic and global aerospace companies, including OEMs.
New Space Opportunities
In many ways, 2022 was also a watershed year for the Indian space programme, with significant successes when the private sector also made its presence felt.
According to industry estimates, India accounted for 2.6% of the global space economy, which in 2020 totalled $440 billion and is projected to reach $600 billion by 2025, growing at a compound annual growth rate (CAGR) of 6%. Fledgling though it is, according to some estimates, the Indian space industry has the potential to capture 9% of the global market share by 2030.
While the Indian Space Research Organization (ISRO) will clearly be the linchpin in this endeavour, the private sector will play a key role. It is heartening that an Indian space startup ecosystem came into its own in 2022.
Of an estimated 370-odd space tech companies in the country, India boasts of over 100 startups, with almost 50% of them taking root in 2021. Significantly, the sector has started seeing the emergence of venture capital funding, which is an indicator of the potential for innovation in the industry.
In a way, we have already started seeing breakthrough innovations by startups. The first private sector rocket took off on a test flight during the year, promising to cut satellite launch costs by up to 50%, compared to other companies. We also saw the announcement of the first 3D-printed single-piece engine being created by an Indian startup.
Most space tech demand in the coming years will be for satellite technologies driven by the almost insatiable demand for data, broadband services and voice communication. Not surprisingly, we are bound to see a lot more activity in downstream satellite applications in 2023 and beyond.
Bread and Butter Business
While these emerging opportunities will, in all probability, occupy headlines in 2023, the Indian A&D sector, particularly in Karnataka, will have to continue its focus on the bread-and-butter business in the global aerospace supply chain.
As global OEMs and Tier-1 players continue to battle supply chain issues, it is likely they will shift sourcing strategies for raw materials, parts and finished A&D goods supplies. Indian companies will have to pitch for more of this business.
At the same time, as aircraft manufacturers focus on investing in modern technologies to reduce operating costs and transition to a net zero industry, Indian companies will have to focus on Industry 4.0, smart factory technologies and advanced manufacturing techniques, such as 3D printing and robotics, to increase efficiency and reduce costs.
(The author is Chairman & CEO, Aequs, a diversified manufacturing platform with presence in aerospace, toys and consumer durable sectors. Aequs operates India’s first private sector Aerospace SEZ at Belagavi, Karnataka)