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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. The industry gets INR 5.94 lakh crore in Budget 2023-24, a jump of 13% over previous year.
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 liberalization. Ministry of Defence has also notified three 'Positive Indigenization lists' comprising of 310 defence equipment 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. 163 Technologies being indigenized, $30 Mn funds sanctioned, 1703 experts and 5020 companies engaged.
Under the Atmanirbhar Bharat Initiative, four positive indigenization lists of 411 products have been promulgated by Department of Military Affairs and Ministry of Defence to be manufactured domestically for the defence sector, instead of being sourced via imports.
SRIJAN portal launched to promote indigenization. 19509 defence items, have been displayed on the portal for indigenization.
- Industry Scenario
- FOREIGN INVESTMENT
- INDUSTRY TRENDS
- POLICIES & SCHEMES
Industry Scenario
To provide impetus to self-reliance in defence manufacturing it is necessary to develop a robust eco-system and supportive government policies.
Ministry of Defence has set a target of achieving a turnover of $25 Mn in aerospace and defence Manufacturing by 2025, which includes $5 Bn exports. Till October 2022, a total of 595 Industrial Licences have been issued to 366 companies operating in Defence Sector.
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.
- The policy is intended to engage the Indian private sector in the manufacture of hi-tech defence equipment in India.
- It is an establishment of long-term strategic partnerships with qualified Indian industry majors through a transparent and competitive process.
- 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)
GROWTH DRIVERS
Defence Industrial Corridors
Government has established 2 Defence Industrial Corridors in Uttar Pradesh and Tamil Nadu. The two defence corridors have together signed 158 memorandums of understanding (MoUs) with industries representing investments worth INR 23,933 Cr ($ 2.9 Bn).
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
Industrial Land Bank Portal
GIS - based map displaying available infrastructure for setting up business operations in the state.
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