India, home to the world’s second-largest armed forces, is now witnessing a revolutionary transformation in its Defence sector. This shift is being driven by the Indian government’s focus on Defence and Aerospace as crucial pillars of the ‘Aatmanirbhar Bharat’ (Self-Reliant India) initiative, with an emphasis on developing indigenous manufacturing capabilities and enhancing a robust research and development ecosystem.
The Interim Union Budget for 2024-25 reflects India’s commitment to strengthening its defence capabilities. Capital allocations for the modernisation and infrastructure development of the Defence Services have been significantly increased to INR 1.72 Lakh Crore, marking a 9.4% rise compared to the 2023-24 fiscal year. Overall, the defence sector has been allocated INR 6.22 Lakh Crore, a 4.79% increase over the previous year. This financial boost underscores the government’s intent to bolster India’s defence infrastructure and technological prowess.
The Ministry of Defence has set an ambitious goal to achieve a turnover of INR 1.75 Lakh Crore in aerospace and defence manufacturing by 2025, with export targets of INR 35,000 Crore. As of April 2023, a total of 606 industrial licenses have been granted to 369 companies in the Defence sector, reflecting the growing industrial participation and the sector’s expansion.
To support the domestic defence industry, the Indian government has prioritised transparency, predictability, and ease of doing business. A series of supportive measures have been implemented, including relicensing, deregulation, export promotion, and liberalization of foreign investment. The Foreign Direct Investment (FDI) limit in the Defence sector has been increased to 74% through the Automatic Route and 100% through the Government Route, making the sector more attractive to foreign investors.
In addition, the Department of Military Affairs (DMA) has issued five Positive Indigenisation Lists, encompassing 5,012 items that must be sourced locally. This move not only strengthens domestic manufacturing but also reduces dependency on foreign suppliers.
The establishment of two dedicated Defence Industrial Corridors in Tamil Nadu and Uttar Pradesh marks a significant step in creating clusters of defence manufacturing. These corridors are designed to leverage existing infrastructure and human capital, fostering an environment conducive to innovation and industrial growth.
Moreover, initiatives such as the Innovations for Defence Excellence (iDEX) and the Defence Testing Infrastructure Scheme (DTIS) are promoting innovation within the Defence and Aerospace ecosystem, furthering India’s self-reliance goals.
The fiscal year 2023-24 witnessed remarkable growth in India’s defence sector. The country spent 3.3% of its GDP on defence, and defence exports reached an all-time high of $2.63 billion.
Recently, the Union Defence Minister Shri Rajnath Singh announced in one of his posts on X that India achieved its highest-ever growth in defence production value during the 2023-24 fiscal year, making significant strides under the Make in India initiative. He stated that production values rose by 16.8% compared to the 2022-2023 fiscal year, reaching Rs. 1,26,887 crores in FY 2023-2024.
A key milestone in India’s journey toward self-reliance was the partnership between Adani Defence and Aerospace and French defence company Thales in June 2024. This collaboration aims to manufacture 70 mm rockets for the Rudra and Prachand helicopters, aligning with the Make in India and Aatmanirbhar Bharat initiatives.
The Defence Production and Export Promotion Policy 2020 (DPEPP) serves as a guiding document for the Ministry of Defence, outlining a structured approach to enhancing the country’s defence production capabilities. The Defence Acquisition Procedure (DAP 2020) further empowers the Indian domestic industry through the Make in India initiative, establishing a preference for procurements from Indian vendors and enhancing indigenous content in defence products.
One of the cornerstone initiatives under DAP 2020 is the Strategic Partnership Model (SPM), which was approved by the Defence Acquisition Council (DAC) in May 2017. The SPM aims to engage the Indian private sector in manufacturing high-tech defence equipment through long-term partnerships with global Original Equipment Manufacturers (OEMs). This model focuses on technology transfers and establishing domestic manufacturing infrastructure, ensuring that India can produce critical defence equipment independently.
India’s defence production landscape is dominated by 16 Defence Public Sector Undertakings (DPSUs). Hindustan Aeronautics Limited (HAL), renowned for producing the lightweight combat helicopter Prachand, is a key player in the aircraft segment. Other notable entities include Bharat Electronics Limited (BEL), Bharat Dynamics Limited (BDL), Mishra Dhatu Nigam Limited (MIDHANI), and BEML Limited, each specializing in electronics, missiles, special alloys, and vehicles respectively.
India’s Defence sector is at the juncture of a transformative revolution, driven by the government’s focus on self-reliance and indigenous manufacturing. With robust budgetary allocations, strategic policies, and active industrial participation, India is well on its way to becoming a global leader in defence production and exports. The initiatives and collaborations underway today will not only strengthen India’s defence capabilities but also position it as a key player in the global defence and aerospace industry.
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