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
- Industry Scenario
- FOREIGN INVESTMENT
- INDUSTRY TRENDS
- POLICIES & SCHEMES
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
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
$ 0.7 bn allocation for modernisation