It is difficult to overstate the importance of India to the world’s big defence players. As western powers sharply reduce defence expenditure, India beckons as the world’s biggest importer. Its air force operates largely obsolete types, while across the Himalayas regional rival China is determinedly upgrading its airpower and aerospace industry. Aside from the competitive cut and thrust of international arms sales campaigns, one key challenge face defence aerospace players in India is offsets – the requirement typically set by developing nations; that a certain percentage of the value of an import deal be locally sourced, to soften the balance of payments impact and for develop local technical capability. In India, these deals amount to big money; the country’s 2012-2013 defence budget of $34.8 billion includes $8.7 billion for the air force, and foreign contractors must generally invest 30% of a deal’s value back into India through offsets. In the recent case of the medium multi-role combat air & competition provisionally awarded to Dassault of France, the offset value is 50% of what could end up being a $10-20 billion deal for Rafale fighters.
Source: Flight International
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