India – indeed, the world – faces a period of unprecedented challenge and change due to COVID-19. This has impacted nearly every industry, particularly, those in aerospace & defense sector dealing with cross-border transportation and physical proximity such as airlines, airports, aircraft manufacturers, and aircraft Maintenance, Repair, Overhaul (MRO). According to analysts, the aerospace and defense sector could take up to 2-3 years to achieve a kind of “new normal” after the pandemic.
To fast-track growth and address any gaps in this market environment, the Indian government has taken concrete measures. At Dassault Systèmes, we recognize that a stimulus package like the one recently announced by the Government of India could be critical to the long-term evolution of the country’s aerospace and defense sector.
The Aerospace & Defense Sector is Poised at a Strategic Crossroads
Prior to COVID-19, aerospace & defense was among the fastest-growing markets in India, witnessing a compound annual growth rate (CAGR) of 19% in civil aviation alone. Now, with curbs on domestic and international travel, the industry must innovate in order to sustain growth. We could predict demand for international travel to stay sluggish for the foreseeable future – but domestic aviation is a different story.
With domestic air travel in India resuming from the 25th of May, 2020, there is a clear opportunity to bolster business and offset any challenges arising from other areas. Two things are critical to achieving this:
- A strong economic stimulus to generate demand and relax business complexities
- Innovative measures in airport infrastructure to build trust and confidence among customers
The Latest Stimulus Package Pushes India’s Aerospace & Defense Sector to New Heights
The Indian government is eager to pave the path to recovery for aerospace & defense, even opening up new opportunities in this dynamic market.
To this end, Our Hon’ble Minister of Finance and Corporate Affairs, Ms. Nirmala Sitharaman has announced a slew of measures to support the Indian Aerospace & Defense industry and all its sub-sectors. The measures are in line with the localization and self-sufficiency trend that the Hon’ble Prime Minister highlighted in his recent speech, designed to bolster civil aviation in India. This includes:
- Relaxations on airspace utilization – This is a major decision, one that could boost revenues of the sector by INR 1000 crore per year.
- Modernization and privatization – Airspace relaxations will apply only if airports are modernized, giving a clear incentive to embrace technology. Privatization of 6 more airports is another decision to infuse capital into modernization efforts while generating INR 13,000 crore revenue for the Indian government.
- Tax subsidy – To strengthen Indian MROs, there will be tax subsidies that will shore up an additional INR 1200 crore revenues over the next three years. This shall also help Indian airlines to reduce their maintenance costs and achieve self-sufficiency, as they wouldn’t have to fly their aircraft to costlier MRO hubs like Singapore.
Another focus area is defense activities. Interestingly, the pandemic has left the defense industry largely unscathed – only propelling it towards self-reliance, in alignment with the Make in India initiative. Our Chief of Defense Staff has urged the use of local products, which is sure to bolster the country’s manufacturing capabilities.
Some of the other measures announced for the defense industry include:
- Increased FDI in defense – FDI in this sector will now stand at 74%, which could garner more interest from global OEMs. India could potentially strengthen its position as a global leader in this sector, thanks to this measure.
- Corporatization of Ordnance Factory Board (OFB) – This move has been in the works for a while, and the pandemic pushed it into execution.
- Privatization of non-strategic PSUs – There will be the privatization of All PSUs in non-strategic sectors. What’s more, the number of PSUs is now limited to four in strategic sectors, thereby opening up new channels for investment and growth.
Looking at the stimulus package, it is clear that the Indian government recognizes the integral role of aerospace and defense in a post-COVID-19 economy. To maximize the possibilities, it is essential for the industry to embrace modernization and leverage the latest technology to maintain continuity.
How Dassault Systèmes Helps to Maintain Operational Continuity in Aerospace & Defense
At Dassault Systèmes, we are working with aerospace & defense stakeholders across the globe to ensure infrastructure-readiness for the “new normal.” Airports, specifically, are a major concern, as it is a public place where thousands of people congregate every day, causing a risk of infection. To prepare airports, therefore, we need a thoughtful reconsideration of design/layouts, centered around health and wellbeing.
We provide aerospace & defense stakeholders with virtual twin technology, allowing airports to conduct accurate what-if analysis to reconfigure everyday processes. Every infrastructural detail in an airport – from open ventilators to paces of congregation – can be first validated using a virtual twin before implementing it in the real world.
This goes a long way in keeping passengers safe, healthy, and secure, even as the industry resumes operations and strives for continued growth.
The stimulus package has a key takeaway: its objective isn’t just to reactively support the economy, but also to proactively capitalize on new opportunities that may emerge. In today’s global market environment, India is well-poised to reinforce its standing and outpace competitors. In terms of confirmed COVID-19 cases, India is in a relatively advantageous position – it is imperative to leverage this timely economic stimulus, coupled with cutting-edge technology innovations, to turn this adversity into an opportunity for the country’s aerospace & defense sector.
Ravikiran Pothukuchi Industry leader, Aerospace & Defense, Dassault Systemes