Article Posted on : - Jul 21, 2010

NEW DELHI (PTI): India is set to become the favourite market for global defence firms as it is expected to spend about $80 billion on defence acquisitions in the next five years, according to a report.

While developed economies like the US and UK are cutting their expenditure on defence in 2010-11, India’s spending in this regard is budgeted at $32 billion. Also, a dramatic increase in investments may be seen in the Gulf countries, a report by Deloitte noted.

“India is likely to spend nearly USD 80 billion over the next five years (2010-15) on new capital acquisitions,” the report noted.

Besides this, the Indian defence budget of $32 billion for the year 2010-11 includes $13 billion for acquisition of new weapon systems, equipment and services, it said.

“The sheer volume of planned expenditure is expected to create new opportunities for global aerospace and defence (A&D) companies, as total spending will grow in absolute terms,” Deloitte (India) Leader Manufacturing Industry Kumar Kandaswami said.

On the contrary, the United States – which spends the most on its defence sector – expects to post a 5 per cent drop in its research and development spend during the fiscal year 2011. Besides this, the UK is expected to have a steeper decline in defence spending.

“Decreasing defence spend by developed countries will require smarter use of the remaining funds in order to develop and deploy the technologies needed to counter more sophisticated adversaries,” General Charles Wald, Deloitte LLP Director and Senior Advisor to the A&D sector, said.

Despite the reduction in defence spending and low sales in the commercial aircraft and business jet segments worldwide, the industry has been resilient. It has managed to post flat financial results in the first quarter of 2010.

“The industry is performing better than many other sectors hit hard by the recession. The imperative now will be to cut costs and grow top line revenue in new areas to demonstrate to global markets the ability to grow profits again,” Deloitte's Global Aerospace & Defence Sector Leader Tom Captain said.

The report also noted that defence companies are generating new revenue from sources like mission capability software integration, battle space simulation, directed energy, precision engagement, threat identification, and energy and infrastructure security, among others.