Indian startups in military tech space need more incentives

Defence major Hindustan Aeronautics Ltd (HAL) posted the highest ever revenue from operations for FY24. The company on Monday said it recorded revenue of Rs. 29,810 crore in FY24, which was 11 per cent rise over the previous fiscal year. According to the company management, this feat has been achieved despite supply chain challenges. “Despite major supply chain challenges arising due to geopolitical issues, the company has met the expected revenue growth with improved performance throughout the year. As of March 2024, our order book exceeds Rs. 94,000 crore, with additional major orders expected during FY25,” its CMD CB Ananthakrishnan said. According to brokerage firm, Jefferies, future seems bright for domestic defence manufacturers. It contends that the global geopolitical tensions and India's rising focus on self-reliance are fueling order flow and revenue growth for domestic defence companies. India's defence exports hit a record Rs. 21,083 crore for the financial year 2024, a testimony to the fact that the government is simultaneously pushing India to be a defence exporter. As per the brokerage firm, defence exports can rise to around Rs. 56,000 crore by the financial year 2030. Incidentally, apart from HAL, another defence PSU, Bharat Electronics (BEL) also achieved a record turnover of Rs. 19,700 crore in FY24, a growth of 13 per cent from last year. This evidences that all stakeholders operating in the defence sector are gaining from the self-reliance push.

Despite all the initiatives, the country remains one of the major importers of defence equipment, which has been classified as the ‘world's largest arms importer’. Between 2019 and 2023, the country accounted for a significant 9.8 per cent of the total global arms imports, according to Stockholm International Peace Research Institute. Such a scenario, though a challenge, throws open myriad opportunities for domestic players. We have already seen a rise in the participation of private players in the Indian defence sectors. Companies like Tata, Mahindra, L&T, Bharat Forge, Reliance, Kalyani Group and Ashok Leyland, among others are actively participating in design and development of arms for the armed forces. The central government’s no import list has definitely enabled these players to actively engage with the defence sector.

Moreover, startups related to defence technologies (deftech) have also come up, which will definitely help the country to realise the goal of self-reliance in the defence sector. Many startups related to new-age drone technology, aerospace, satellite, laser and many more have also come up in recent years. This bodes well for making India an active defence industrial complex. Funding to the military tech companies is also rising, which is a reflection of the sector’s huge potential and prospects in the coming years. However, the country needs more active support to its startups working in the deftech space. Recently, it launched ADITI (Acing Development of Innovative Technologies with iDEX (Innovations for Defence Excellence) scheme under which start-ups will be eligible for financial aid of up to Rs. 25 crore for research, development, and innovation in military technology. More such schemes will certainly help startups in the military technology space to grow, which will truly make India ‘self-reliant’ in the defence sector.