Weapons and
Ammunition in India
WEAPONS AND AMMUNITION
- Over 2000-2010 the Indian weapons and ammunition market
increased more than 59% to exceed INR5 billion in 2010. India is
recognised as one of the largest and fastest-growing markets for weapons
and ammunition in the world. Given rapidly increasing government
consumption the market is very attractive for domestic companies to
operate in as well as for foreign enterprises to enter.
- Weapons and ammunition grew, on average, 7% annually
over the review period, and given the India is reckoned to be one of the
largest and fastest-growing markets for weapons and ammunition in the
world, the potential for future growth remains high. The main factor
underpinning growth is purchases associated with gross fixed capital
formation and change in stock purposes, accounting for two-thirds of total
sales on average. In value terms, purchases for investment purposes
advanced, on average, by 6% annually to exceed INR3 billion. Companies’
direct expenditure averaged 30% of total sales and grew at a sustainable
pace of 6% annually over the review period to reach INR1.6 billion in
2010. Household spending, on one hand, comprised the minority of total
market value – 7% in 2010, but that represents a sizeable increase from
less than 1% in 2000.
- Throughout the review period the growth in turnover of
local producers closely followed the trend of the total market. Over
2000-2010 sales of local producers increased 65%, or by 6% annually, and
secured INR4.9 billion in 2010. Manufacturing of bombs, missiles and
similar items proved the most lucrative, as indicated by the 84% share of
total turnover in 2010. Bombs, missiles and similar increased on average
by 8% annually over the review period, and in 2010 saw turnover of INR4.1
billion. Small arms ammunition was second in terms of sales, generating
more than 11% of total turnover in 2010 (a sizeable decrease from the 25%
share seen in 2005). The relative decrease in share of total turnover was
due to an actual decline in nominal terms of 13%, comparing 2000 and 2010.
The sales of parts of military weapons represented the smallest share of
total turnover – 5% in 2010. In nominal terms sales of parts of military
weapons doubled over the review period, growing at an average annual rate
of 12%, and accounted for INR253 million in 2010.
- Imports witnessed a 6-fold expansion over the review
period to reach INR1.5 billion in 2010. In 2002, India established a
defence procurement policy that was intended to reduce the percentage of
critical defence items imported into India to 30% of the total. Instead,
the proportion has increased to 75%. The main import partners during the
decade were South Africa, Italy, Germany, the USA and China. The majority
of imports came from South Africa, which accounted for 82% of the total in
2009 and 76% in 2010. The remaining partners accounted for significantly
lower shares.
- Similar to imports, exports grew almost 11-fold over
the review period to reach INR1.4 billion in 2010. The main export
partners were Germany, Egypt, the USA, Israel and Italy. In 2009-2010
Germany became the primary market for Indian weapons and ammunition
exports, receiving approximately half of the total. Exports include the
KAVACH MOD II and AK 630M to Italy; 5.56mm cartridges to Israel, Singapore
and US; 40mm L-70 gun barrel and cartridges to Singapore; 7.62mm machine
guns (MAG) to Saudi Arabia; 105mm ammunition to Botswana, vintage rifles
and spares to Australia, among others.
- Total industry costs amounted to approximately 80% of
total turnover. The composition of costs was such that in 2010 B2B costs
accounted for 39% of the total, labour for 38%, while taxes less subsidies
represented an additional 23%. However, during the period under review,
the cost structure varied a great deal. In nominal terms, cost categories
experienced the following developments: B2B costs grew at an annual rate
of 6% and reached more than INR1.5 billion in 2010; labour costs increased
the most – by 11% a year – and reached just a hair below INR1.5 billion;
taxes less subsidies grew the least – 2% annually – and ended up with
INR903 million in 2010. Profit margins (EBITDA) doubled over the review
period with an average annual rate of 9% to reach INR999 million in 2010.
- Due to so-called “low-intensity conflicts” within
India, i.e. against Maoist rebels known as Naxalites, the prolonged
conflict with Pakistan over the disputed Kashmir region, and local
movements for the alleviation of gun control, the Indian market for
weapons and ammunition is expected to continue to attract the interest of
global weapons industry in coming years. Overall industry is expected to
grow by 11% annually during the period of 2011-2016.
