Tata to Manufacture Aerospace Parts for Boeing

Tata and Boeing have signed a joint venture agreement today, whereby Tata will manufacture a variety of parts for Boeing, including for military combat aircraft such as the FA-18 SuperHornet, which is a contender in the bidding for India's next combat aircraft. I think this is great news, as it would allow India to go in for adding US warplanes to its mixed arsenal, thereby reducing our dependency on any one nation for supplies. It would also kickstart our own aerospace industry in the military and civil sectors, so that we can build up a high-end value-added manufacturing supply chain for aerospace systems.

Like I've said, we live in a much tougher neighborhood than Brazil does, and yet they have a leading aircraft manufacturer like Embraer, while we don't. We definitely need to make our aerospace sector much stronger and more competitive. Besides, the high-margin aerospace segment will provide more high-paying blue-collar manufacturing jobs, to help spread money beyond IT techies. We saw how many Indians joined the mad rush into IT once they found how much money they could make, and similarly it would be nice to see a strong flow into high-end high-tech manufacturing areas like aerospace, once they see how much extra money they can make from that. Indians have to climb out of the IT coccoon and diversify into other areas, because that one pasture is going to get overgrazed, while other worthy technical areas of opportunity are being left untended and underdeveloped.

China has built up its manufacturing base by starting with the low-end and is gradually moving up the value chain. With more agreements like this one with Boeing, we may see Indian manufacturers directly moving in at the upper echelons of the value chain, and then expanding out both above and below, as well as other directions. (So-called "organic growth".) This may get Indian players into directly becoming OEMs sooner rather than later. It would be nice to see a Tata Aerospace and other similar entities springing up around India. Tata's other enterprises like its automotive arm could also benefit from acquiring advanced manufacturing techniques from the aerospace arm. Boeing itself will gain global competitiveness from this deal, which in turn will compel its competitors to seek similar tie-ups in India. So we're going to see a lot of good ripple effects from breakthrough ventures like this one.

Please do check out the various articles now making headlines on the subject. I wonder what will happen to the stock prices for each company as a result of this news.