Boeing, the second-largest defence contractor in the United States, is to pitch for up to $15 billion (£7.6 billion) of military hardware contracts in India over the next decade as it attempts to put the country among its top three Asian markets.

Jim Albaugh, the chief executive of Boeing Integrated Defense Systems, the defence and space arm of the Chicago-based group, said that there had been discussions with about 40 Indian private and state-owned companies about joint ventures, although he declined to name them.

“Though we do not generate any revenue from India right now, we expect a $10 billion to $15 billion market to grow over the next ten years,” he said, adding that the company hoped to add India to its supply chain to export to other markets. “We would like to source some products here to drive down costs of our offerings. We want to take advantage of the technological skills and labour in India.”

Boeing is not yet a player in the defence sector in India, which consistently has been the developing world’s biggest spender on military hardware and software since 1998 as it upgrades an ageing defence capability.

The company’s biggest international markets are Australia, Japan, Singapore and South Korea, but four teams of executives will visit India in coming months to seek partnerships with domestic companies.

Boeing supplies commercial aircraft in India and has just delivered the first of 68 planes to Air India under an $11 billion contract, the largest commercial aircraft order in India’s civil aviation history.

Like many international companies eyeing growth opportunities in the Indian defence sector since the Government opened the market to foreign investment in 2001, it is keen to gain a foothold.

The company is waiting to hear if it has been successful in its bid to supply the Indian Navy with eight P8A multimission maritime aircraft. It is also offering to sell CH47 heavy-lift Chinook helicopters and T45 naval training aircraft. The big deal on the horizon, however, is the contract with the Indian Air Force to supply 126 new jet fighters. India’s Russian-made MiG21 and MiG25 aircraft are more than three decades old and the Government is committed to upgrading its fleet, as well as purchasing missiles.

The contract is estimated to be worth about $9 billion, but the figure is speculative until the Government publishes its invitation to tender, expected before the end of the year.

Competition will be fierce, with rival bids expected from Lockheed Martin, of the US, Dassault Aviation, of France, Sukhoi Design Bureau, of Russia, Gripen-SAAB (a joint venture between Saab, of Sweden, and BAE Systems of Britain), and the Eurofighter consortium, in which BAE Systems has a 33 per cent stake. Boeing is pitching its multipurpose FA18 Super Hornet jets.

According to the US Congressional Research Service’s latest report on developing nations, India eclipsed China in the arms race in 2005. India agreed $5.4 billion of defence deals, compared with China’s $2.8 billion. Saudi Arabia was second, with $3.4 billion of purchases.

Analysts expect the trend to continue as India upgrades outdated weapons systems and maintains a high vigilance against threats posed by unstable neighbours and international terrorism. India’s defence budget in the last fiscal year was $19 billion, or 2.96 per cent of gross domestic product, but it is expected to exceed $30 billion by 2012.

This year during a four-day defence exposition, Indian ministers invited global arms producers from “friendly” countries to enter the market through joint ventures with local suppliers. The market has long been dominated by state-run enterprises, but private companies, such as Mahindra & Mahindra, Tata Group, Kirloskar Brothers, Larsen & Toubro and Ashok Leyland, are emerging as key suppliers. India imports about a third of its hardware requirements, but this is expected to change with more domestic public-private partnerships, according to Frost & Sullivan, the research consultancy.

Fliying high

Defence goods market size in 2005: $6.2 billion

Sources: Indian Air Force, Frost & Sullivan report

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive