Snapshot

Defending the World

India accounts for 3.7% of the global military spending, making it the third highest military spender in the world. The defence expenditure constituted 2.9% of India’s total GDP with approximately $72.9 billion spent on defence in 2020. Under the Field Artillery Rationalization Plan - 1,580 towed guns, 100 tracked guns, 814 Mounted Gun System will be required in India.

With the growing demand in the defence sector the government has identified it as one of the core areas to boost ‘Atma Nirbhar Bharat or Self-Reliant India. The Government has also spelt out its vision of achieving a turnover of Rs US$ 25Bn including export of US$ 5 Bn in Aerospace and Defence goods and services by 2025.

To support defence modernisation, in the budget 2021-22 the defence capital outlay has been increased by 18.75% from the preceding year. This is the highest ever increment in the last 15 years.

To cater to the growing demand the government has called for an increased participation of the private sector in defence manufacturing. The opening up of the industry also paves the way for foreign original equipment manufacturers to enter strategic partnerships with Indian companies.

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. To meet export requirements, a draft Production and Export Promotion Policy (DPEPP) 2020 has also been formulated.

The Government of India has enhanced FDI in Defence Sector up to 74% through the Automatic Route for companies seeking new defence industrial license and up to 100% by Government Route.

For further details, please refer FDI Policy

  • %

    GDP spent on defence (2021-22)

  • %

    Share in global arms import

  • $ bn

    Union budget 2021-22

  • $ mn

    Exports (Mar- Dec 2020)

Second largest armed forces in the world

Ongoing DRDO projects in India of worth $ 7.3 bn

SRIJAN portal is used as a platform to promote indigenisation. 1,776 components & spares have been indigenised.

Industry Scenario

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

DPEPP 2020

Ministry of Defence formulated a draft Defence Production and Export Promotion Policy 2020 (DPEPP) to position India amongst the leading countries of the world in defence and aerospace sectors

The 8 Pillars DPEPP 2020 are:

  • Reform procurement ecosystem
  • Indigenize and support MSME and start-ups
  • Optimize resource allocation
  • Promote investments, FDI and ease of doing business.
  • Promote innovation and R&D
  • Encourage and reform DPSUs and OFB
  • Provide quality assurance and testing infrastructure
  • Promote exports

DAP 2020

The government released Defence Acquisition Procedure 2020 (DAP) to transform India into a global manufacturing hub with a focus on indigenously designed, developed, and manufactured weapon systems.

Under the DAP’20 offset guidelines have been revised to incentivize discharge of offsets. Preference would be given to manufacture complete defence products over components or sub-parts.

The offset guidelines have also been revised, wherein preference will be given to manufacture of complete defence products over components and various multipliers have been added to give incentivisation in discharge of offsets

To engage better with foreign OEMs and enhance indigenous content, the following categories have been provided for procurement:

  • Buy (Indian-IDDM)
  • Buy (Indian)
  • Buy & Make (Indian)
  • Buy (Global-Manufacture in India)
  • Buy (Global)

POSITIVE INDIGENISATION LIST 

Under the ‘Atmanirbhar Bharat’ campaign of Govt of India, Ministry of Defence (MoD) has prepared a list of 209 items, Positive Indigenization List, for which there would be an embargo on the import beyond the timeline indicated against them. This would offer a great opportunity to the Indian defence industry to manufacture these items.

STRATEGIC PARTNERSHIP MODEL

In the defence sector, the ‘Strategic Partnership (SP)’ Model envisages establishment of long-term strategic partnerships with Indian entities through a transparent and competitive process, wherein they would tie up with global Original Equipment Manufacturers (OEMs) to seek technology transfers to set up domestic manufacturing infrastructure and supply chains.

 

GROWTH DRIVERS

  • Defence Industrial Corridors

    Government has established two Defence Industrial Corridors in Uttar Pradesh and Tamil Nadu. Investments of $2.85 Bn have been planned in Defence corridors by year 2024.

  • Innovations for Defence Excellence (iDEX)

    iDEX aims at creating an ecosystem to foster innovation and technology development in Defence and Aerospace by engaging Industries including MSMEs, Start-ups, Individual Innovators, R&D institutes, and Academia.

  • Technology Development Fund (TDF)

    TDF has been created under DRDO to promote self-reliance in Defence Technology through participation of Public/Private industries especially MSMEs and start-ups.

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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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