India’s Defence Sector: From Imports to Self-Reliance

India has borders adjoining various nations, which means its security needs are constantly evolving. A robust defence sector is essential to ensure that we are well-prepared to face regional and global challenges.

In recent years, there has been a significant shift in India’s defence sector, with a heightened focus on promoting domestic defence production and reducing dependency on imports, aligning with the goal of an ‘Atmanirbhar Bharat’ (self-reliant India).

In this article, we examine India’s defence sector, including aspects like production and export, the current state of affairs, government initiatives and more.

The Rise of the Indigenous Defence Industry

For decades after independence, India heavily relied on foreign imports for its defence equipment. By the mid-1990s, India imported nearly 70% of its defence equipment.

However, in recent years, the Indian government has emphasised achieving self-reliance in the defence sector. Initiatives like ‘Make in India’ and ‘Atmanirbhar Bharat’ have played a crucial role in promoting indigenous defence production and reducing imports.

Furthermore, the Defence Acquisition Procedure (DAP) 2020 has been revised to prioritise domestic suppliers. Several initiatives have also been launched to foster collaboration between the industry and the Defence Research and Development Organisation (DRDO).

The Current State of India’s Defence Sector

India ranks as the fourth largest spender on defence globally. In the interim budget for FY 2024-25, India allocated $74.5 billion (Rs 6,21,540.85 crores) to the defence sector. This constituted approximately 13.04% of the central budget, announced by Finance Minister Nirmala Sitharaman on February 1, 2024. Moreover, military spending has more than doubled over the past decade, reflecting the nation’s commitment to enhancing its defence capabilities and moving towards self-reliance.

Indian Defence Production and Export

According to the Press Information Bureau (PIB), domestic defence production in FY 2023-24 reached Rs 1.27 lakh crore, marking a 16.7% growth compared to the previous year and a 60% growth compared to 2019-20. This is a positive step towards self-reliance.

However, India remains the largest arms importer globally. Despite this, exports have reached a record high of $2.5 billion (Rs 21,083 crores) with a 32.5% growth, up from $1.9 billion (Rs 15,920 crores) the previous year. This figure represents nearly 14 times growth in defence exports and a 45.6% compound annual growth rate (CAGR) since 2016-17.

Government Initiatives Promoting the Defence Sector

Several government initiatives are playing a crucial role in advancing India’s goal of self-reliance in the defence sector. Let’s take a look at some of these initiatives:

Defence Production and Export Promotion Policy 2020: This policy was introduced to boost defence production capacities and exports.

Defence Acquisition Procedure 2020: This policy aims to strengthen the domestic industry through the ‘Make in India’ initiative. It also encourages Foreign Direct Investment (FDI) and invites foreign companies to set up manufacturing plants in India.

Positive Indigenisation List: This list mandates that specific equipment for the Indian armed forces (Army, Navy, and Air Force) be sourced from domestic companies or Defence Public Sector Undertakings (DPSUs). This not only reduces import costs but also promotes MSMEs in the defence sector.

Initiatives to Promote R&D and MSMEs: The government provides financial support through schemes like ‘Make-I’, ‘Technology Development Fund’ (TDF), and ‘Innovations for Defence Excellence’ (iDEX) projects to encourage the development of indigenous defence equipment.

Defence Corridors: Two defence corridors have been established in Uttar Pradesh and Tamil Nadu to promote indigenous production of defence and aerospace products. These corridors have attracted a total investment of $4.5 billion.

Make Projects: This initiative aims to strengthen indigenous capabilities and encourage Indian companies to design and develop defence equipment.

Leading Companies in India’s Defence Sector

India is rapidly advancing toward self-reliance in the defence sector, and several leading Indian companies are playing key roles in this progress.

Let’s take a look at some prominent defence companies:

Bharat Electronics Limited (BEL): Established in 1954, this company manufactures specialised electronic products for the Indian defence sector.

Bharat Dynamics Limited (BDL): Founded in 1970, this company is a leader in the manufacture of ammunition and missile systems.

Hindustan Aeronautics Limited (HAL): Established in 1940, HAL is one of the largest global manufacturers of aircraft and defence equipment.

Paras Defence and Space Technologies Limited: This company is a leader in defence, aerospace, and space technology, focusing on innovative solutions and advanced technologies.

Data Patterns (India) Limited: This company manufactures electronic boards and systems used in the defence and aerospace sectors.

IdeaForge Technology Limited: A manufacturer of unmanned aerial vehicle (UAV) systems for security and surveillance.

Mazagon Dock Shipbuilders (MDL): Established in 1934 in Mumbai, MDL is a leading shipbuilding yard. Since coming under government control in 1960, it has built 802 ships, including 28 warships and seven submarines.

Cochin Shipyard Limited (CSL): Founded in 1972, CSL has emerged as a major player in the Indian shipbuilding and ship repair industry over the last three decades. This shipyard is capable of building and repairing the largest ships in India.

The Future of India’s Defence Sector

The Ministry of Defence has set a target of achieving $26 billion in aerospace and defence manufacturing by 2025, including $5 billion in exports. This goal will not only help reduce India’s defence imports but also establish the country as a major defence exporter. Additionally, the Ministry of Defence anticipates awarding contracts worth approximately $57.2 billion (Rs 4 lakh crores) to the domestic industry between 2025-2027. Moreover, the ministry has set a goal of achieving 70% self-reliance in arms by 2027. These figures indicate vast opportunities for Indian industry in the defence sector.

The Green Channel Status (GCS) policy has been implemented to further promote the role of the private sector in defence production. This policy will encourage private sector investment and facilitate their participation in defence production.

That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!

The article is for information purposes only. This is not an investment advice. Disclaimer: Teji Mandi Disclaimer