Snapshot

Defending the World

"The Indian Defence sector, the second largest  armed force is at the cusp of revolution. The Government has identified the Defence and Aerospace sector as a focus area for the ‘Aatmanirbhar Bharat’ or Self-Reliant India initiative,with a formidable push on the establishment of indigenous manufacturing infrastructure supported by a requisite research and development ecosystem. The vision of the government is to achieve a turnover of $25 bn including export of $5 bn in Aerospace and Defence goods and services by 2025.        

India is positioned as the 3rd largest military spender in the world, with its defence budget accounting for 2.15% of the country’s total GDP. Over the next 5-7 years, the Government of India plans to spend $ 130 Bn for fleet modernisation across all armed services. As per Union Budget 2022-23,$ 70.6 bn was allocated to the Ministry of Defence. In line with the self-reliant India initiative, the share of domestic capital procurement, which was earmarked at 64% in 2021-22  has been enhanced to 68% of the Capital Acquisition Budget of the Defence Services for FY 2022-23. 

To support the domestic defence industry the government aims to ensure transparency, predictability, and ease of doing business by creating a robust eco-system and supportive government policies. Towards this end the government has taken steps to bring about de-licensing, de-regulation, export promotion and foreign investment liberalisation. Ministry of Defence has also notified three 'Positive Indigenisation lists' comprising of 310 defence equipments to be manufactured locally. Additionally, to promote export and liberalise foreign investments FDI in Defence Sector has been enhanced up to 74% through the Automatic Route and  100% by Government Route.

The government has also announced 2 dedicated Defence Industrial Corridors in the States of Tamil Nadu and Uttar Pradesh to act as clusters of defence manufacturing that leverage existing infrastructure, and human capital.  Further, to enable innovation within Defence & Aerospace eco-system there are supportive government schemes such as iDEX ((Innovations for Defence Excellence) and DTIS (Defence Testing Infrastructure Scheme). 

For further details, please refer FDI Policy

 

  • %

    GDP spent on defence (2021-22)

  • %

    Share in global arms import

  • $ bn

    Defence Sector Market Size

  • %

    Increase in Defence Capital Expenditure (FY21-22)

DRDO’s Technology Development Fund (TDF) for MSMEs & Startups to indigenize cutting-edge defence technologies. 135 Technologies being indigenized, USD 20 Mn funds sanctioned, 1236 experts and 2563 companies engaged 

India has around 194 defence tech startups building innovative tech solutions to empower and support the country’s defence effortsOngoing DRDO projects in India of worth $ 7.3 bn

SRIJAN portal launched to promote indigenization. 19509 defence items, have been displayed on the portal for indigenisation

Industry Scenario

To provide impetus to self-reliance in defence manufacturing it is necessary to develop a robust eco-system and supportive government policies.

Defence Production and Export Promotion Policy 2020 (DPEPP)

Ministry of Defence (MoD) has formulated a draft DPEPP 2020 as guiding document of MoD to provide a focused, structured, and significant thrust to defence production capabilities of the country for self-reliance and exports.

Defence Acquisition Procedure (DAP 2020)

DAP 2020 aims to empower Indian domestic industry through Make in India initiative and • It has Laid down a strict order of preference for procurements.and has adequately included provisions to encourage FDI to establish manufacturing hubs both for import substitution and exports while protecting interests of Indian domestic industry.

Salient features of DAP 2020

  • Reservation in Categories for Indian Vendors.
  • Enhancement of Indigenous Content.
  • Rationalisation of Trial and Testing Procedures.
  • Make & Innovation.
  • Design & Development.
  • Industry Friendly Commercial Terms.
  • Offsets.

Strategic Partnership Model

The Defence Acquisition Council (DAC) approved the broad contours of the Strategic Partnership Model (SPM) in its meeting held on May 20, 2017, under the chairmanship of the defence minister.

  1. The policy is intended to engage the Indian private sector in the manufacture of hi-tech defence equipment in India.
  2. It is an establishment of long-term strategic partnerships with qualified Indian industry majors through a transparent and competitive process.
  3. The Indian industry to partner with global OEMs (original equipment manufacturer) for big-ticket military contracts seeking technology transfers and manufacturing know-how to set up domestic manufacturing infrastructure and supply chain.

- In the initial phase, strategic partners will be selected in the following
segments:
(3a) Fighter Aircraft.
(3b) Helicopters.
(3c) Submarines.
(3d) Armoured fighting vehicles (AFV)/Main Battle Tanks (MBT)

Union Budget 2022 Highlights

  • 68% of the capital procurement budget to be reversed for domestic industry in 2022-23
  • 25% of defence RGD budget earmarked for industry, startups & academia

GROWTH DRIVERS

  • Defence Industrial Corridors

    Government has established 2 Defence Industrial Corridors in Uttar Pradesh and Tamil Nadu. Uttar Pradesh has a developed manufacturing base with 9 ordinance factories and 3 units of HAL.Tamil Nadu has 120+ companies in aerospace component manufacturing and produces over 5,000 aerospace engineers every year.

  • IDR Act

    Defence Products list requiring Industrial Licences has been rationalised and manufacture of most of parts or components does not require Industrial License. The initial validity of the Industrial Licence granted has been increased from 03 years to 15 years with a provision to further extend it by 03 years on a case-to-case basis.

  • Promotion of indigenous design and development of defence equipment

    A new category of capital procurement ‘Buy {Indian-IDDM (Indigenously Designed, Developed and Manufactured)}’ has been introduced in Defence Procurement Procedure (DPP)-2016

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Industrial Land Bank Portal

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

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FAQs

Frequently
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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