India EU Defence Industrial Cooperation: Integration of Supply Chains, First Step

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The Security And Defence Partnership between European Union [EU] and India of January 2026 has a strong element for defence industrial cooperation, which plugs into India’s low-cost manufacturing ecosystem and EU countries' requirements for scaling up defence systems acquisitions with enhanced budgetary allocations of 3 to 5 per Cent.

The industrial partnership is aimed to exploit for mutual benefit co-production through joint R&D, manufacturing and supply chain integration.

The bilateral industrial projects can be envisaged in land systems, aerospace components, and munitions.

For Europe, India acts as a cost-competitive, politically reliable manufacturing base, especially for dual-use technologies and components.

For India, where the government has set ambitious targets for defence exports, the EU offers opportunities to scale up to high-end technologies and access NATO-grade supply chains.

At the same time, there is a need to underline that the two industrial systems are at great variance in terms of regulation and certification, both in industry and defence; certification and standardisation; skill sets of labour; as well as industrial and labour policies and export control regimes.

While the Indian defence industry has expressed much enthusiasm in manufacturing in Europe and even establishing or acquiring companies therein, caution is advisable as the case of Bharat Forge demonstrates.

Pune-based Bharat Forge [BFL] is a well-regarded Indian industrial major which has proven expertise in forging and component manufacturing. Bharat Forge acquired Carl Dan Peddinghaus GmbH (CDP), one of the largest forging companies in Germany, with a Memorandum of Understanding (MOU) between BFL and CDP signed in Ennepetal near Dusseldorf, way back in 2003.

Today, over two decades later, Bharat Forge's board approved a considerable restructuring initiative for its German subsidiary BF CDP GmbH on April 9, 2026. It reviewed and evaluated a comprehensive proposal for the phased restructuring of the steel forging operations in Ennepetal, Germany to include an orderly wind-down and solvent liquidation of BF CDP, in accordance with applicable German laws.

For the June quarter 2026, Bharat Forge has recorded an exceptional charge of Rs 358 crore [€ 30 Million] on account of BF CDP restructuring.

While this may be an isolated incident, it underlines the difficulties encountered by Indian companies as committed as Bharat Forge in making a pitch in the European industry with multiple complexities.

While Bharat Forge has the financial and industrial muscle, smaller companies will find such shocks unsustainable.

A more viable option for Indian companies is to embed in the European Tier 2 and 3 supply chains by “Making in India for Europe,” exploiting the strength of component manufacturing in the Indian defence industry and European requirements to lower costs. As the Partnership Document states, “Initiatives on both sides are aiming at strengthening cooperation on security and defence, including resilience of supply chain,” maybe a more viable approach in the early stages of expansion in defence industrial cooperation.

In this initial state, meticulous risk management is called for, as Indian companies will have to anticipate Europe’s complex industrial environment, which varies across all economies within the EU as well as in the UK.

India’s labour cost advantage is viable only for manufacturing in India with a high level of skill sets that must be built up through sustained training for components which can meet EU and NATO standards.

Through integrating into the supply chain of large European manufacturers, exposure to swings will be limited while establishing a long-term relationship of mutual benefit.

For India there is a need for emphasis by domestic industrial companies on improving global competitiveness. This should be undertaken through a step-by-step approach rather than being over ambitious in the early stages of defence industrial cooperation between different ecosystems.