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.        

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.

Ministry of Defence has set a target of achieving a turnover of INR 1.75 lakh crore in aerospace and defence Manufacturing by 2025, which includes exports of INR 35,000 crore. Till April 2023, a total of 606 Industrial Licences have been issued to 369 companies operating in Defence Sector.

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

  • %

    Share of 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. 164 Technologies being indigenized, $30.8 Mn funds sanctioned, 1886 experts and 5270 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. 27130 defence items 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.

Ministry of Defence has set a target of achieving a turnover of $25 Bn 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.

  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
(3a) Fighter Aircraft.
(3b) Helicopters.
(3c) Submarines.
(3d) Armoured fighting vehicles (AFV)/Main Battle Tanks (MBT)


  • Defence Industrial Corridors

    The government has established 2 Defence Industrial Corridors in Uttar Pradesh and Tamil Nadu. The two defence corridors in Uttar Pradesh and Tamil Nadu have together signed 158 memorandums of understanding (MoUs) with industries representing investments worth $ 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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Asked Questions

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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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.

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