Electronics mkt aimed at defence may reach Rs 2 L cr in 5 yrs

Industry body IESA with research firm PwC has estimated that electronics market catering to Indian defence, aerospace and internal security can reach Rs 2 lakh crore over the next five years.
"Defence, Aerospace and internal security (DAIS) electronics market size is estimated to be around Rs 30,000 crore in 2014 and is growing with CAGR of 18 per cent. It has potential to grow to Rs 200,000 crore in 5 years," India Electronics and Semiconductor Association (IESA) Chairman Ashok Chandak said.
He said that all defence and security equipment heavily rely on electronics and government can boost domestic electronics manufacturing sector by making a policy framework that can connect indigenous players with defence technologies.

IESA had been one of the key associations in providing data that was used by Ministry of Communications and IT to come out with National Policy on Electronics.
The joint study of IESA and PriceWaterhouseCoopers said that India's defence budget has grown to Rs 2,24,000 crore, with 40 per cent allocated to capital spends which may grow to Rs 1,37,000 crore to Rs 1,54,000 crore by 2018.
"Government must facilitate domestic players to learn about defence and security electronics requirement and both public and private sector can jointly work to reduce import of electronics bill in the DAIS sector estimated to be around 70 per cent of total requirement. It is in line with Prime Minister's idea of 'Make in India' program," Chandak said.

The joint study has recommended that to start with government should re-introduce services as an eligible offset component.

The offset guidelines stipulate a minimum 30 per cent of a equipments purchased in deal size valuing Rs 300 crore and above should have domestic components. However, many Indian companies don't make product that can meet defence standards and hence multinational companies find it difficult to satisfy offset clause.
The study recommended that "services be re-introduced as an eligible offset avenue. The ministry may insist on an independent valuation of software and design services, for example, through a Transfer pricing study."
The study recommended that Foreign Direct Investment for manufacturing electronics product for DAIS sector should be increased to encourage technology in the field to set up manufacturing facility in the country which can boost domestic ecosystem.

The study said that at times, the Indian offset partner (IOP) imports goods, processes them and delivers finished goods to the Ministry of Defence.