India–US Trade Pact Could Lift India’s Aerospace Push

The recently announced India-US trade deal is expected to significantly benefit India’s aerospace and aviation sectors, as global aircraft manufacturers seek to expand their presence in one of the world’s fastest-growing aviation markets, according to industry insiders.

Global aerospace firms are carefully reviewing the provisions of the trade agreement with an eye on increasing sourcing from India and tapping into the expanding demand for aircraft and related products, signalling deeper strategic cooperation between the two countries’ aviation ecosystems.

Zero-Duty Access To The US Market Could Spur Export Growth

Under the trade framework, aerospace components exported from India to the United States are expected to benefit from zero-duty access, bringing India in line with other major supply hubs such as:

• Europe

• Japan

• South Korea

This provision is seen as a key enabler for an exponential increase in India’s aerospace exports, which currently stand at around $1.5 billion annually for Airbus and $1.25 billion for Boeing.

Officials say that with tariff relief and broader market access, Indian aerospace suppliers could significantly expand their footprint in US supply chains and attract new business from global original equipment manufacturers (OEMs).

Can Boeing’s Strategy Expand Under The New Framework?

Industry sources report that Boeing has indicated plans to double its sourcing from India, as part of efforts to deepen supply chain engagement with Indian vendors.

Commerce and Industry Minister Piyush Goyal has also stated that India is likely to emerge as one of Boeing’s largest overseas component supplier bases over the coming years.

The tariff reduction from about 50% to 18% on aerospace products is expected to provide substantial cost relief for domestic suppliers and help enhance competitiveness in the global market.

Fleet Expansion Plans Keep Aircraft Demand Outlook Strong

In addition to components sourcing, this trade agreement is viewed as an impetus to new airplane orders among Indian airlines, as capacity growth is accelerating.

Government officials estimate that Indian carriers, led by Air India and IndiGo, could place aircraft, engine, and spares orders worth $70 billion–$80 billion in the coming years.

With Indian carriers privately owned and not subject to offset requirements, India’s Make in India policy has incentivised aircraft manufacturers to scale up sourcing from local suppliers even as fleet demand continues to grow

What Does This Mean For Investors?

To investors in the aerospace, aviation, and engineering industries, the India-US trade agreement provides some long-term structural windbreaks:

• Expanded Export Opportunities: Access to zero-duty would have a significant impact on exports of aerospace parts, which would advantage component manufacturers and players in the engineering services industry with a global supply chain involvement.

• Growing Aircraft Demand: The anticipated aircraft orders are likely to be in the tens of billions of dollars, which can potentially drive the demand for the associated parts, services, and financing ecosystems.

• Deepened Global Integration: The enhanced connections with the key OEMs in the US could assist Indian aerospace suppliers in deepening technology capacity, scaling, and international competitiveness.

Although the entire effect will be realised in the long run as certain sourcing and order agreements become solid, the framework is an indicator of a strategic change that is likely to define aerospace and aviation developmental paths over the next few years.

Sources:

ET Infra

Economic Times