Category: Economy

Adani Group is mulling a foray into defence and aerospace production, keeping pace with several other big industrial groups’ drives into the “Make-in-India” initiative. Big defence spending is in the offing as defence is being seen as a sunrise sector. The place pitched for the possible manufacturing is an obvious choice: Mundra in Gujarat (it is the country’s largest private port and SEZ), utilizing its sea and land linkages.

Adani executives—including Karan Adani, the elder son of Gautam Adani, the chairman of the Adani Group—have met delegates from large overseas defence companies that have experience in manufacturing a range of defence equipment to explore how international and domestic tie-ups can be materialized.

The Adani executives have been conducting high-level meetings for the past few weeks, and have also been making exploratory calls to almost all global defence and aerospace manufacturers having liaison Adani Group is mulling a foray into defence and aerospace production, keeping pace with several other big industrial groups’ drives into the “Make-in-India” initiative launched by offices in New Delhi. At least two top Adani executives have been given the responsibility of foraging the potential collaborators and report success.

The following companies may be Adani Group’s future partners in defence manufacturing: Saab—Swedish aerospace and defence company, founded in 1937 and originally manufacturing aircrafts; Finmeccanica—Italy’s leading industrial group and one of the main global players in aerospace, defence and construction; Textron—an American industrial conglomerate founded in 1923 and manufacturing aircrafts.

Saab mainly produces fighter aircrafts and submarines, and is keen on establishing a manufacturing unit in India, ultimately targeting to win the Rs. 60,000-crore P-75I submarine (Scorpène-class submarines, a class of diesel-electric submarines) contract and the light Gripen fighter jet production contract.

Finmeccanica operates in seven sectors: aeronautics, helicopters, defence systems, electronics, space, transportation and security. It manufactures through its companies AgustaWestland, Alenia and Oto Melara.

Textron manufactures Bell Helicopters (famous for mission-critical helicopter operations all around the world) and Cessna Aircrafts (light and mid-size business jets). Textron is also being considered for a howitzer guns contract for the Indian army; it will be a $700-million contract.
Adani Group’s focus, as obvious from the exploratory discussions, is on “Make-in-India” projects, and the Group is looking forward to transforming its large land holding in Mundra into a defence manufacturing hub.

In March 2015, the Adani Group registered a new entity—Adani Defence Systems and Technologies Ltd (ADSTL)—and in April 2015, it applied to the Department of Industrial Policy and Promotion (DIPP) for a licence to manufacture helicopters under ADSTL.

Adani Group is an Indian multinational conglomerate company headquartered in Ahmedabad, in the State of Gujarat, India. Its diversified verticals include resources, agri-business, logistics and energy sectors including power generation, gas distribution and coal mining.

Some other large conglomerates have already set their sights on the defence and aerospace sector, due to the huge potential it offers as India’s defence needs are large and expanding, and it is counted as one of the biggest spenders in the defence and aerospace sector in the world. The Adani Group is the latest to turn in this direction, others being Larsen & Toubro, the Reliance Group of Anil Ambani, Mahindra & Mahindra, and the Tatas.

The Adani Group is cashing in on the fact that its SEZ and port would prove to be a unique advantage for defence manufacturing, as large-scale and high-end transportation and production can occur at the same place, though a thorough market analysis is still underway and a final decision will be taken after positive reports.

With an annual defence budget of about $40 billion of which 60 per cent (i.e. $24 billion) is being spent on purchase of defence equipment, India is the world’s largest defence importer, as the domestic defence manufacturing is still developing.

Forecast by the International Monetary Fund (IMF) is a fulfilment now as India’s economy is growing faster than China’s. India has been moving in the opposite direction while many countries around the world are dealing with low growth. It’s definitely a special moment for India with so much growth prospect in front of it!

Observing India’s third-quarter GDP growth and comparing it with that of China’s in the fiscal 2014–2015, the IMF had foretold in March 2015 itself that India would surpass China’s economy and soon become the fastest growing economy in the world.

Amid the shaky period of the global economy, India held its ground. Indian rupee gained in value against the strong US dollar this year, while the currencies of Brazil, Turkey and South Africa experienced losses. The Central Statistics Office (CSO) of India numbers showed 7.5% GDP for January–March 2015 quarter. On the other hand, China had a 7% growth rate for the same period.

China has been showing a slowdown in its economy consecutively in the third and fourth quarters of fiscal 2014–2015, while India is benefited by the lower oil prices and policy reforms of its comparatively new government led by Prime Minister Narendra Modi. China is most likely to have a slow GDP growth in the coming time, which would give a huge scope to India to grow faster than China and other peer economies.

Various Sectors of the Indian Economy that Have Shown Growth

The tremendous economic growth in India has been possible due to the contribution of a number of different sectors of the Indian economy. These sectors of the economy have been showing a continuous growth that finally has led India to register itself as the ‘fastest growing economy in the world’. The new policy reforms by the Modi government have brought improved business confidence that boosted economic activities in India. The budget approved by the Union government of India is moving in the right direction containing a number of promising elements for economic growth of the country. However, the challenge remains on the practical implementation.

By emerging as a prominent sector of the Indian economy in terms of contribution to national and states’ incomes, trade flows, foreign direct investment (FDI) inflows, and employment, the Services sector has contributed hugely in India’s growth. Finance, insurance and real estate have performed strongly for quite some time now. These services have grown by 11.5%. The Manufacturing sector has shown a growth of 7.1%; services such as trade, hotels, transport and communications have experienced a growth rate of 14.1%.

India’s Finance Secretary, Rajiv Mehrishi, has talked about the greater job opportunities in India. By improvement in the Manufacturing sector’s growth, India is able to create more jobs. A positive phase has just started; way to go!

Sectors that Have Lagged Behind in Positive Growth

In the fourth quarter of 2014–2015 fiscal, the Mining and Quarrying sector’s output reduced to 2.3% as compared to a growth of 5.4% during the fourth quarter of 2013–14 fiscal. The Agriculture sector showed a 0.2% growth in fiscal 2014–15 as against 3.7% in fiscal 2013–2014. Below-average rain damaged crops which subsequently brought the growth down.

Structural reforms in India may lead to productivity gains in such sectors. Reforms in education, labour, and product markets, etc. may help in raising labour force participation and productivity for better growth prospects.

“India is a ‘bright spot’ in a ‘cloudy global horizon’. The country’s young population and progress on structural reforms would help the economy to ‘fly’ in the coming years.”
– Christine Lagarde (Managing Director, IMF)

“India has the potential to make 9–10% its new normal in the years to come.”
– Arun Jaitley (Finance Minister, India)

“I would say (the economy is) picking up. We see some signs of capital investment picking up. There is a continuing need, which the government is trying to address, of putting some of the stalled projects back on track. But we have to work (on) bottlenecks and areas where we need reforms to ensure that growth is strong and sustainable.”
– Raghuram Rajan (Governor, Reserve Bank of India)

“We believe that countries that invest in people’s education and health, improve the business environment, and create jobs through upgrades in infrastructure will emerge much stronger in the years ahead. These kinds of investments will help hundreds of millions of people lift themselves out of poverty.”

– Jim Yong Kim (President, World Bank Group)