SOURCE: AFI
In recent years, European defence firms have increasingly turned to India as a strategic hub for manufacturing, driven by cost advantages, a skilled workforce, and India’s growing prominence in the global defence ecosystem. This trend reflects a broader shift in the global defence industry, where partnerships and outsourcing are reshaping supply chains.
By offloading manufacturing to Indian companies, European firms are not only optimizing costs but also aligning with India’s push for self-reliance in defence production under the “Make in India” initiative. This article explores the drivers, key partnerships, and implications of this trend.
India offers a cost-effective manufacturing environment due to lower labor costs and favorable economic conditions compared to Europe. Producing defence equipment in India allows European firms to reduce production costs while maintaining quality standards, making their products more competitive in global markets.
India’s large pool of skilled engineers, technicians, and manufacturing professionals, coupled with improving industrial infrastructure, makes it an ideal destination for defence manufacturing. European firms benefit from access to this talent pool while leveraging India’s growing network of industrial corridors and defence manufacturing hubs.
Collaborating with Indian companies provides European firms access to India’s burgeoning defence market, one of the largest in the world. India’s increasing defence budget (approximately $81 billion in 2024-25) and modernization programs create opportunities for European companies to secure contracts by partnering with local firms.
Amid global supply chain disruptions and geopolitical tensions, European firms are diversifying their manufacturing bases to reduce reliance on traditional hubs. India’s stable political environment and strategic alignment with Western nations make it a reliable partner for defence production.
Key Examples of European-Indian Defence Collaborations
Several European defence giants have forged partnerships with Indian companies, either through joint ventures, technology transfers, or outsourcing agreements. Below are notable examples:
- Airbus (France/Spain): Airbus has significantly expanded its footprint in India, particularly in aerospace and defence manufacturing. The company’s joint venture with Tata Advanced Systems Limited (TASL) to produce the C295 military transport aircraft is a landmark deal. Under this agreement, 40 of the 56 C295 aircraft ordered by the Indian Air Force will be manufactured in Vadodara, Gujarat. This marks the first instance of a private company in India assembling a military aircraft, showcasing the deepening trust in Indian manufacturing capabilities.
- Dassault Aviation (France): Dassault, the maker of Rafale fighter jets, has partnered with Indian firms like Reliance Defence and TASL for offset obligations tied to India’s purchase of 36 Rafale jets. These partnerships involve manufacturing components such as aerostructures and radar systems in India. Dassault’s collaboration with Indian firms aligns with India’s offset policy, which mandates foreign suppliers to invest a percentage of the contract value in local production.
- Saab (Sweden): Saab has been actively exploring opportunities in India, particularly for its Gripen fighter jet. The company has proposed co-manufacturing and technology transfers with Indian partners like TASL and Mahindra Defence Systems. Saab’s strategy includes setting up production lines in India to meet both domestic and export demands, leveraging India’s manufacturing ecosystem.
- Thales (France): Thales has established joint ventures with Indian companies like Bharat Electronics Limited (BEL) and L&T Defence to manufacture radar systems, avionics, and electronic warfare equipment. These collaborations focus on co-development and production, enabling Thales to tap into India’s defence market while transferring critical technologies.
- MBDA (European Consortium): MBDA, a leading missile manufacturer, has partnered with Indian firms like Larsen & Toubro (L&T) to produce missile systems and components. MBDA’s collaborations focus on integrating Indian-made components into its global supply chain, supporting both Indian and international defence programs.
The trend of European defence firms offloading manufacturing to India is likely to accelerate as India continues to liberalize its defence sector and invest in manufacturing infrastructure. The government’s push for indigenous production, coupled with initiatives like the Defence Industrial Corridors in Uttar Pradesh and Tamil Nadu, will further attract European investment. Additionally, India’s participation in global forums and its strategic alignment with Europe will strengthen these partnerships.
For European firms, India represents not just a manufacturing hub but a strategic partner in addressing global defence challenges. For Indian companies, these collaborations offer a chance to climb the value chain, moving from component manufacturing to co-development and innovation. As this trend evolves, it will reshape the global defence industry, fostering a mutually beneficial relationship between Europe and India.
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