Bureaucracy, over-ambitious offset requirements and potentially inadequate protection from financial risk threaten to hinder the ability of overseas manufacturers to take advantage of the booming aerospace market in India.
Key issues that could prevent companies taking advantage of an economy projected to grow by more than 7% annually are highlighted by the Society of British Aerospace Companies (SBAC) in evidence submitted to the UK House of Commons Trade & Industry Committee inquiry into trade and investment opportunities in India.
The SBAC warns that India’s “unrealistic” expectations on offset obligations risk undermining foreign investment in the country. India currently has an offset requirement of 30% of the value of a contract worth more than $70 million, including the expectation of technology transfer and intellectual property rights.
The SBAC also points out that the UK Export Credit Guarantees Department (ECGD), which provides a safety net for manufacturers selling to “risky” markets, may need to increase the amount of cover it has allocated to India.
The ECGD’s current allocation of £500-750 million ($885 million to $1.33 billion) “may appear to be more than adequate today, but if account is taken of the infrastructure requirement to support these aircraft deliveries...and assuming that UK companies will be successful in bidding for at least a portion of those projects, these limits may need to be reviewed upwards in the not too distant future,” the SBAC says.
HELEN MASSY-BERESFORD/LONDON
Source: Flight International
