04/08/2014 2

Defence, Fire & Security Sector in India

Siddharth Vishwanathan

Trade & Investment Adviser
UK Trade & Investment (Western India)

British Deputy High Commission

Mumbai

04/08/2014 3
India the sub-continent
of contrasts
Land area of over 3.2 million square Km; 7
th
largest country

Union of 29 states (including the city of Delhi) and 6 Union
territories spanning snow capped mountains, tropical rain
forests, arid desert, high plateaus, fertile river plains

1.2 billion; 250 million households (70% under 35)

72% rural; 28% urban

Average literacy rate is 65%

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Indias Economic story
o GDP (2010 est) USD $1.37 Trillion (China $5.36 Trillion)
o India's exports total less than 1% of global trade, compared with 7% for China

o GDP Growth 7.4% for 2009-10 (estimate 8.5% 2010-11)








o



o Service industry responsible for 62% of GDP
o Inflation currently 10.16% but food inflation 17%
o Economic indicator 16 Million new mobile users May 2010
o Interest rates approx 10%
04/08/2014 5
Indias Economic story: Infrastructure
Development









04/08/2014 6
Construction
Industry valued at 50 billion
Second largest employer after
agriculture - 31 million people
Contributes 20% of GDP
Ranks 4
th
for FDI inflow
Growing at 9% per annum
Phenomenal growth in urbanisation has led to huge
unmet demand for housing, retail and commercial
spaces
150 new Special Economic Zones
28% of population in urban environments
To rise to 40% by 2012
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Airports
Airports - Passenger
traffic to grow 10%

Flight cargo by 7%

Plan to modernise 35
non-metro airports and
develop seven green
field airports

Nagpur cargo and
passenger hub

Navi Mumbai airport?
04/08/2014 8
Ports
Largest merchant shipping fleet amongst
developing countries - 17th in world
Cargo through 12 major ports has grown
annually at 9.5% per year over the last 3 years
50 projects valued
at US$13 billion
planned
7 ports to be
developed in
Maharashtra and
Gujarat
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Roads
Roads US $50 billion
worth of projects underway

Including 68,000 km of
national highway
improvements


2,000 km of express
way development

$600m on 460 km of Mumbai roads,
20 + new flyovers, strengthening
of existing bridges, new Sealink
projects and potentially multi million
tunnelling needs

Looking at India???
Lets give it a shot
The statistician
Make the quick buck
The investor
Key Success Factors
Strategic thinking
Forward Approach
Market Perseverance
Due Diligence
Solid Partner
Key Drivers
Essentially 2 sets of drivers:
1. Terrestrial security threat perception
- 14000 kms land borders
- 7000 kms coastlines
- Red corridor
- Critical national infrastructure (13 major ports, 200 minor ports, 67000 kms
national highways, 150000 MW powerstations)

2. Post 26/11 security climate
- Businesses
- Hotels
- Malls
- Airports etc
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Key regions in India for the
security market.
Classification of the sector
Defence
Armed Forces - Military hardware, software, equipment,
consumables and technology.
Homeland security requirements of paramilitary, police, fire
services.
Critical National Infrastructure Protection.

Commercial Security
Physical Security
Cyber security

Research & Development for Security.
Education, Consulting & Training for Security.
Defence
Recent reports suggest government spending on approx. 5 billion pounds on
homeland security.
Defence & homeland security equipment
- 15% state of the art
- 35% mature
- 50% obsolete.
2009-10 budgetary allocation 20 billion pounds for defence. (35% increase)
Acquisitions drafted under the Long Term Integrated Perspective Plan (LTIPP)
expected to include procurements to the tune of 80 billion pounds by 2022.
10
th
largest defence spender.
70% procurements from overseas. (efforts towards indigenous production ???)



Commercial Security
Physical Security
- Pegged at 1.1 to 1.3 billion pounds
- Generally understood as electronic security, perimeter security, fire safety, currency
handling etc.
- Growth estimated between 25% to 40%
- 2014 estimated size 4.5 billion pounds
- Opportunities in modernization of existing systems in airports and other critical
infrastructure.
- Over 5000 companies (organized and unorganized) ; 150 ISO 9000 certified.
- Over 40% of demand met thru imports. (USA, UK, China, Korea, France, Israel)
- Demand for integrated solutions
- Emphasis on quality training and accredited solutions
- Growing acceptance and demand from SMEs, educational institutions, residential
complexes, hospitals etc.



Security Market
I
India Security Market

Segmentation
Basis
Segments
Surveillance
Cyber
Security
Physical
Security
Systems

Services
Access
Controls
Alarm
System
Fire
Detection
and
Protection
Others
Commercial Security
Product Sector Proportion Market Market Size (US$) Size in INR Annual Growth
CCTV (Commercial
& Industrial Cameras,
Housings, Monitors,
DVR) 55% 192.5 866 45%

Access Control
(Controllers, Readers,
Locking Hardware,
Barriers, Cards) 30% 105 473 30%

Intrusion Detection
(Perimeter & Building
Alarm Controllers &
Detectors. Incl.
Electric Fences) 2% 7 32 20%

Intercom
(Audio & Video
Doorphones) 2% 7 32 30%

Others
(Metal Detectors,
X-Ray etc) 11% 38.5 173 30%
TOTAL 350 1575 26%
Research & Development
Had been restricted to central Govt. funded projects.
Recently large private players and R&D startups involved
Areas of R&D.
Consulting
Security Planning and Management
Policy
Loss prevention
Systems consulting
Certifications and audit
Forensics.

Electronic Security Govt. initiatives

Both Union and State governments looking to put forth
regulations that will make security more accessible.
These include:
Reduction in their import customs duty to 5%
Reduction in Excise duty to 4%
Reduction in state VAT to 2%
Abolition of Service Tax levied on guarding services
Classification of security systems as life safety
equipment

Overview of competition
Russia, Israel, USA, France, Germany.
Increasing JVs
Indian companies looking for partners
Tatas, Mahindra, L&T, Wipro, etc.
Supply Chain
Regulatory Environment
Highly regulated number of rules for manufacture, import, license, distribution etc.
FDI cap in defence 26% (possibly increase to 49%)
Since 2001 Indian private sector allowed to participate with 100% equity but licensing.
Despite FDI caps, many foreign companies setting up JVs.
Defence offset policy (30%)
Restricted R&D
Import duties as high as 30% !!
Transfer of Technology clause for some procurement contracts.


Security Demand Projections by 2014
Hotel Infrastructure security - US$1.2 billion
Transport Sector Security (Aviation + Railway) - US$1 billion
The Banking & Financial Sectors security - US$800 million
Govt. facilities & real estate - US$400 million;
Public Health & Healthcare sector - US$665 million
Industry sector - US$840 million;
The Indian GPS and Telematics market potential - US$450 million.
The vehicle tracking segment of the Indian telematics market -
US$50 million;


04/08/2014 28
UK India : The Bilateral Scene
UKs Exports to India (2009) UK 2.893 billion (4.1 2008)

Principal Exports capital goods, gold, ferrous & non-ferrous
metals, electronic goods, chemicals and pharmaceuticals.

UKs Imports from India (2008) UK 4.325 billion

Principal Imports Readymade garments, gems & jewellery, agri
products, leather goods, chemicals and pharmaceuticals

UK is Indias sixth largest trade partner

Educational Co-operation: 44,000 Indian students currently
studying in the UK; They constitute the 2
nd
largest number of
international students after China;
Over 226 UK institutions visited
India over the year.








(Source : Centre for Monitoring Indian Economy - CMIE)

Thank You.

Siddharth Vishwanathan
s.vishwanathan@fco.gov.uk
Direct Tel: +91 22 66502195