Modernization of armed forces
$ 130 bn opportunity in coming 7-8 years
Snapshot
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. 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.
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. Domestically produced defence platforms, equipment, and spares worth $ 317 mn were exported to over 28 countries in 2015-16.
100% FDI is allowed in defence industry; wherein 49% is allowed under automatic route and beyond 49% through Government route.
For more details refer to FDI Policy 2017
2.3%
GDP spent on defence
13%
Share in global arms import
$ 2.1 bn
Turnover of OFB in 2015-16
$ 309 mn
Exports (2016)
Second largest armed forces in the world
Ongoing DRDO projects in India of worth $ 7.3 bn
30% offset requirement for procurement of equipment in excess of $ 307.69 mn
Industry Scenario
5.3% increase in defence allocation was recorded in budget 2017-18 compared to budget 2016-17.
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.
India’s share in global military expenditure stood at 3.3% in 2016.
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%
Growth Drivers
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
Recent Announcements
Sterlite, a global technology leader in web-scale digital networks, has been awarded a $ 539.0 mn Advance Purchase Order to design, build and manage the Indian Navy's communications network. This will give the Indian Navy digital defence supremacy at par with the best naval forces globally.
Eric Trappier, Chairman of Dassault Aviation and Anil D. Ambani, Chairman of the Reliance Group laid the Foundation Stone for the Dassault Reliance Aerospace Limited manufacturing facility in Mihan, Nagpur located in India’s western state of Maharashtra.
Tata Safari STORME’s into the Indian Army with the initial order for 3192 units
Infrastructure development
Manufacturing cluster & park planned in Pune & Dholera
R&D
$ 15.4 mn allocated to set up ‘Technology Development Fund’
Indigenously designed, developed and manufactured (IDDM)
New category of capital procurement
Major Investors
Data on Map
FAQ
Frequently
Asked Questions
What is the permissible FDI limit in the defence sector?
DIPP vide Press Note No. 5 of 2016 Series dated 24 June 2016 notified review of Foreign Direct Investment (FDI) Policy on various sectors including which includes conditions related to FDI in defence at Para 5 of the said Press Note. According to the revised guidelines, Foreign Investment Cap upto 49% is allowed through automatic route and beyond 49% under Government route, wherever it is likely to result in access to modern technology or for other reasons to be recorded. The foreign investment in defence sector is further subject to industrial license under the Industries (Development & Regulation Act), 1951. The detailed guidelines in this regard may be seen under the Press Note available at DIPP website (link, followed by link Acts & Rules).
Which is the Administrative Ministry for the grant of extension for Defence Industrial Licence? Where should the company apply for extension of Defence Industrial License?
Ministry of Defence, Department of Defence Production is the Administrative Ministry for grant of extension of Industrial licence under the I(D&R) Act, 1951 to the private sector. The Company may send their IL extension application to Contract Purchase Officer, Department of Defence Production, Ministry of Defence, D(DIP) Section, Sena Bhawan, New Delhi.
What is the FDI inflow in the defence sector since the opening for Private Participation?
As per the FDI statistics available at DIPP’s website, an FDI inflow of $ 5.12 million (INR 25.51 crores) has been received in the country till September 2017 (as per data available on DIPP’s website).
How many JVs/ FDI proposals have been approved in the defence sector so far?
Since May, 2001 after opening the defence production sector for 100% participation in private sector, so far 36 JVs/FDI proposals have been approved for manufacture of wide range of licensable defence items.
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.
