Boosting the Aerospace sector: The crucial role of MSMEs and the need for government support in the industry
By Sanjeev Kumar, CEO and Co-Founder, Logic Fruit Technologies
The Indian aerospace industry has been on a rapid growth trajectory in the past few years, and experts estimate that this upward trend will continue into the near future. According to Custom Market Insights, a leading market research firm, the Indian aerospace and defence market was valued at USD 27.1 billion in 2024 and is expected to reach USD 54.4 billion by 2033, at a CAGR of 6.99% during the forecast period 2024 – 2033.
One of the major factors that is driving the expansion of this sector is the increasing manufacturing demand from both domestic and international aircraft carriers. This has led to the aerospace manufacturing sector making strides in innovation and technology to keep up with the demand for the design and development as well as production of various critical components and systems in addition to aircraft engines. This burgeoning demand can only be met if top industry players like Hindustan Aeronautics Limited (HAL), Tata Advanced Systems Limited (TASL), L&T Aerospace and others are supported by smaller players with deep-tech expertise & leveraging cutting-edge technologies.
Enter Micro, Small and Medium Enterprises (MSMEs) that range from local shops to medium-sized establishments with substantial operations. MSMEs are called the backbone of the Indian economy because they foster innovation, generate employment and are key in promoting equitable development. This is exactly why MSMEs will play a key role in boosting the aerospace sector to drive growth. MSMEs possess the expertise to produce a wide range of aerospace components, are vital links in the supply chain of delivering these components to manufacturers and from there to distributors, and are agile enough to keep up with the ever-evolving market demands. This is in contrast to large organisations that may rely on cumbersome, long-drawn-out processes because of an established hierarchical bureaucracy.
The government of India recognises that the strength of the aerospace industry depends largely on the strength of the supply chain systems. There are a substantially large number of MSMESs across the country supplying components and sub-assemblies and systems to defence public sector undertakings, Indian ordnance factories, Defence Research and Development Organisation (DRDO) and private industries.
This is why there is a big push towards “Make in India” especially in the Aerospace and Defence (A&D) sector. The recent announcement by Samir V Kamat, Secretary, the Department of Defence R&D and Chairman, Defence Research & Development Organization (DRDO) that there is a clear thrust of the government to increase the indigenous content in defence and aerospace sector to more than 70% in the next 3-4 years is a testament to this. He emphasised that this can only happen if the MSME sector contributes and works with the large industries as well as DRDO. A couple of years ago, Prime Minister Narendra Modi lent special emphasis to ‘Make in India’ by inaugurating the 2015 Aero India Air Show in Bengaluru and employing ‘Make in India’ as the theme of his inaugural speech. Similar themes have been mentioned sporadically at air shows and Defexpos, keeping the idea alive in the public’s mind.
The government has also put in place special incentives for MSMEs in its policies such as the Defence Offset Policy which encourages the development of synergistic sectors like civil aerospace, and internal security, reservation in procurements and the like. This is in addition to interactions conducted with vendors and concerned stakeholders are organised regularly at various levels to understand their issues and decisions are taken to address their concerns. Reduced imports, and record-high defence exports in the area of A&D is a positive sign, however, there is still room for improvement if the Indian aerospace sector has to compete with global giants. There is a pressing need for service or product-linked incentives to foster collaboration between big companies and MSMEs, changes in regulations to simplify cross-border transactions with global supply chains and aim for self-reliance in the global aerospace industry.
There is also a lack of a clear Aerospace Policy and an independent nodal agency to facilitate collaboration and a comprehensive policy for accessing national assets. Additionally, increased government spending in the area should follow a ground-up model, and reach small startups, MSMEs and academia to fuel research and development (R&D) to achieve holistic, sustainable growth. It is safe to conclude that the Indian Aerospace sector’s future hinges upon the symbiotic relationship between big companies, MSMEs and the government. The latter should introduce more industry-friendly schemes that will be able to give a major push to the growth of the sector, and help the collaboration between larger and smaller players. It is by addressing regulatory challenges, incentivising partnerships, and promoting manufacturing on a large scale that India can become a global Aerospace hub and compete with world leaders.
