Defending the World

India plans to spend $130 bn on military modernization in the next 5 years, as achieving self- reliance in defence production is a key target for the Government of India. India is the third biggest military spender in the world. The Government has opened up the Defence industry for private sector participation to provide impetus to indigenous manufacturing. The opening up of the industry also paves the way for foreign original equipment manufacturers to enter into strategic partnerships with Indian companies. Annual Turnover by Private sector in Defence and Aerospace sector in 2018-19 is $2.4 bn.

A Defence export strategy has been formulated with a view of facilitating Defence Public Sector Enterprises (DPSUs) and private defence players in exploring business opportunities abroad. The total value of production for OFB & DPSUS together accounts for $8.0 bn.

The government has formulated policies to boost defence exports and achieve defence export target of $5 billion in the next five years.

100% FDI is allowed in Defence industry; wherein 74% is allowed under automatic route and beyond 74% through Government route.

For further details, please refer FDI Policy

  • %

    GDP spent on defence

  • %

    Share in global arms import

  • $ bn

    Union budget 2020-21

  • $ mn

    Exports (Mar- Dec 2020)

Second largest armed forces in the world

Ongoing DRDO projects in India of worth $ 7.3 bn

Highest ever increase in capital outlay (FY 2021-22) of Defence (INR 1,35,060.72 cr) in the last 15 years

Defence Manufacturing Information Kit

Industry Scenario

5.8% increase in defence allocation was recorded in budget 2020-21 compared to budget 2019-20.

The allocation towards defence in budget 2017-18 stood at $ 41 bn with $ 13.3 bn (or 31.7% of the total budget) reserved for capital expenditure.

The total budget sanctioned for the Indian military for the financial year 2018-19 is $62.8 bn; accounting for 12.1% of the total Union Government expenditure for 2018-19.

There are 2 Defence Corridors in India  (i) Uttar Pradesh, which leverages the existing manufacturing ecosystem in the state Ideally suited for economic testing and R&D facilities and (ii)Tamil Nadu, which ensures a mature manufacturing ecosystem for investments and innovation

Service/ department-wise allocation as a percentage of total defence estimates 2017-18 (BE):

  • Army: 55.9%
  • Navy: 14.6%
  • Airforce: 22.5%
  • DGOF (Directorate General of Ordnance Factories): 0.8%
  • DGQA (Director General of Quality Assurance): 0.5%
  • R&D: 5.7%


  • Defence exports strategy

    Liberalised process of issuing clearances

  • Online NOCs

    Started in November 2014 for industry friendliness

  • Shore Based Test Facility (SBTF)

    Improved test facilities leading to more local manufacturing

  • Indigenously Designed, Developed & Manufactured (IDDM)

    Focus – Buy and make IDDM, Indian over global

  • Modernization programmes

    $ 0.7 bn allocation for modernisation

Industrial Land Bank Portal

GIS - based map displaying available infrastructure for setting up business operations in the state.


Asked Questions

What is the defence sector overview in recent times?

The Achievement report of the defence sector covering policy initiatives, R&D and other important areas can be accessed on the link.

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Is there funding provided by the government for certain categories?

Yes, projects under 'Make-I' sub-category involves Government funding of 90%, released in a phased manner and based on the progress of the scheme, as per terms agreed between MoD and the vendor.

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Are the any incentives for MSMEs under DPP?

DPP 2016 provides great impetus to the MSMEs with certain categories of 'Make' products earmarked exclusively for MSMEs.

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How are the capital acquisition schemes classified under DPP?

Capital Acquisition schemes are broadly classified as 'Buy', 'Buy and Make' and 'Make'. In decreasing order of priority the procurement of defence equipment, under this procedure are categorised as follows:
1) Buy (Indian - IDDM).
2) Buy (Indian).
3) Buy and Make (Indian).
4) Buy and Make.
5) Buy (Global).

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What is the Defence Procurement Procedure (DPP) 2016?

The DPP is formulated to ensure timely procurement of military equipment, systems and platforms as required by the Armed Forces in terms of performance capabilities and quality standards, through optimum utilisation of allocated budgetary resources. It is worthwhile to mention that the document is not merely a procurement procedure but also an opportunity to improve efficiency of the procurement process to realize the vision of 'Make in India' in the defence sector.

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