Strategic electronics industry looks to ride the Defence FDI wave .

With the Government mulling to open foreign direct investment in Defence, the Defence electronics or strategic electronics sector in the country is set to witness a boom.

The Electronic Industries Association of India (ELCINA) is looking to drive this growth by bringing SMEs, multinationals, defence public sector undertakings and private majors together to facilitate business expansion and higher local value addition.

“Wherever there is an opportunity, we are looking to facilitate investments. The growth in Defence and Defence electronics will pave the way for investments into the sector,” Mr Rajoo Goel, Secretary-General, ELCINA, said.

He also added that in recent years there is a growing preference in strategic sourcing for domestic route over import of technology. “There is a shift towards ‘develop and make models' vis-a-vis the previous ‘buy and make' policy.

The talent pool is increasing; public private partnership is also emerging by sharing of prototype and serial production activities”. The Commerce and Industry Ministry has put out a discussion paper that suggests an increase in FDI in Defence to 74 per cent from 26 per cent will encourage greater local manufacturing and technology transfer.

Mr Goel said that communications and security devices will be a big area of growth. There is also opportunity from global aviation companies looking to source from India.

“Under the Defence Offset policy implemented by the Defence Offset Facilitation Agency (DOFA), any Defence purchase valued over Rs 300 crore must have a local component of 30 per cent sourced from Indian industry. For Indian manufacturers, this is a significant area of opportunity.”

The production of strategic electronics in India during 2007-08 was Rs 5,700 crore which rose to Rs 6,900 crore in 2008-09, registering a growth of 21 per cent. There is potential for this to grow at 25 per cent a year and Strategic Electronics has been identified as key growth by the Task Force constituted by the Department of IT, Ministry of Communications and IT.

Mr Goel said this growth potential has been fuelled by the expanding budgetary allocation for the Defence sector which grew by 34 per cent in 2009-10 to Rs 141,000 crore.

Source : Business Line