Government Nudging Airbus, Boeing To Set Up Final Assembly Lines In India

The Indian government is reportedly in talks with aircraft manufacturers like Boeing and Airbus, to set up their Final Assembly Lines (FAL) in India, with expectations of 2,000 aircraft orders from the country in the coming decade.

India is currently the seventh largest aviation market in the world and is expected to become the third largest, within the next 10 years. Its fast-growing middle class is increasingly taking to the skies, with passenger traffic rising by more than 50 per cent in 2022 itself.

India will therefore, buy more than 2,000 aircraft in the next fifteen years to fulfill the growing demand, and importing all these planes may prove to be expensive.

Last month, the Ministry of Commerce had raised flags over a sharp rise in imports of unladen aircraft of over 15,000 kg into the country, with the Ministry of Civil Aviation.

The Ministry mentioned that for April-September 2022, there has been over a 56 per cent rise in imports, which rose to $2 billion in FY-22.

The acquisition of Air India by the Tata Group has further increased expectations for mega orders, for aircraft coming from Indian carriers, in the coming weeks. The government is therefore, nudging manufacturers to not just source their parts and components from India, but to set up the entire assembly ecosystem in the country.

A Final Assembly Line requires having the entire supply chain ecosystem in its vicinity — right from aircraft body, wings, and assembled engines to seats.

This would not only create direct and indirect job opportunities in semi-skilled to high-skilled jobs, like design and engineering, it would also boost the country’s export earnings, and develop an entirely new manufacturing ecosystem from scratch.

India has so far failed to leverage its domestic markets and purchasing power to get manufacturing lines in the country. While companies like Boeing, source nearly $1 billion worth of supplies from India, with over 60 per cent in manufacturing, others like Lockheed Martin have Joint Ventures with Tata Advanced Systems Limited in Hyderabad.

A full FAL however, has been off the cards, so far.

Previously, Prime Minister Narendra Modi had laid the foundation stone of C-295 transport aircraft manufacturing in Vadodara, Gujarat on 30 October 2022. The aircraft will be manufactured for the Indian Air Force, by Tata Advanced Systems Limited and Airbus Defence and Space, Spain.

The ₹22,000 crore project will be the first-of-its-kind in India by a private company and will be used for civilian purposes as well. The first ‘Made-in-India’ C-295 is expected to be rolled out by 2026.

India might also go for exporting these aircraft, while developing as a Maintenance, Repair and Overhaul (MRO) hub for them, as they are operated by a number of countries in the region.

The aircraft manufacturing market today is being seen as akin to automobile markets in the 1990s, where India has emerged as a major exporter in the last two decades. The sector is crucial in realizing the goal of ‘Atmanirbharta’ while positioning India as the next global manufacturing hub.