India has given the final nod for the acquisition of another 97 indigenous Tejas Mark-1A fighter jets and six advanced Airborne Early Warning and Control (AEW&C) aircraft, known as "eyes in the sky." This combined procurement, valued at approximately Rs 85,500 crore (around $10.3 billion USD), is a strategic move to bolster India's air capabilities in the face of the collusive and "fused" threat from China and Pakistan.

The PM-led Cabinet Committee on Security (CCS) approved the Rs 66,500 crore ($8 billion USD) deal for 97 "improved" Tejas Mark-1A fighters to be produced by Hindustan Aeronautics Limited (HAL). This adds to an earlier order of 83 single-engine light combat aircraft of the same type, inked in February 2021 for Rs 46,898 crore. This substantial order signifies strong confidence in India's indigenous manufacturing capabilities and supports the "Atmanirbhar Bharat" (Self-Reliant India) initiative.

For the AEW&C aircraft, the project will involve mounting advanced active electronically scanned array antenna-based radars and electronic and signal intelligence systems onto second-hand Airbus A321 aircraft previously acquired from Air India. This project, costing Rs 19,000 crore ($2.3 billion USD), is expected to deliver all six AEW&C aircraft by 2033-34. These aircraft are crucial for enhancing surveillance capabilities along the borders and directing friendly fighters in air combat against enemy jets, addressing a significant capability gap compared to neighboring nations.

Market Signals

Aerospace & Defense Sector: This massive order provides a significant boost to HAL, strengthening its position in the global aerospace market and expanding its supply chains.
Competitive Positioning: The order solidifies the Tejas Mk-1A's role as a capable light combat aircraft, potentially enhancing its export prospects.
Economic Impact: This significant investment in India's defense sector contributes to job creation and technological advancement.

Winners & Losers

Winners: HAL, the Indian Air Force (IAF), the Indian defense industry, and domestic as well as international component suppliers. Potential Losers: International competitors who may lose future deals in the Indian market.

Action Timeline

Immediate: Acceleration of production by HAL, expansion of supply chains.
Short-term: Integration of advanced technologies into AEW&C aircraft, meeting delivery schedules.
Long-term: Enhancement of IAF's combat readiness, strengthening of Tejas's export position.

Risk Assessment

Production Delays: HAL's ability to meet ambitious production targets.
Technological Integration: Ensuring seamless integration of new systems into AEW&C aircraft.
Geopolitical Factors: Any regional escalation could impact procurement timelines.

Key Indicators

HAL Production Ramp-up: An indicator of India's ability to meet its defense needs.
AEW&C Aircraft Development: Reflects the progress in India's surveillance and intelligence capabilities.

Regional Perspective

This large-scale acquisition is a response to specific security threats in South Asia, focusing on building indigenous defense capabilities to address regional geopolitical challenges.

Immediate Implications

Supply Chain Opportunities: Increased demand for defense-related components and services.
Procurement Acceleration: Efforts to reduce defense equipment acquisition timelines in India.

What to Watch

HAL's Production Capacity: Monitoring HAL's ability to meet Tejas production targets.
AEW&C Aircraft Development: Tracking the progress of modification and integration of these aircraft.
Engine Supply: Continued monitoring of GE's engine supply for the Tejas.

Analysis

This significant acquisition is a crucial step in modernizing the Indian Air Force and substantially enhancing its defense capabilities. It reflects India's commitment to self-reliance in the defense sector and signals a positive trend for domestic defense industries, with production and delivery timelines requiring close monitoring.