India poised to become world’s largest defence manufacturing base

The Indian defence sector, the second largest armed force, is at the cusp of revolution. The Union government has identified the defence and aerospace sector as a focus area for ‘Aatmanirbhar Bharat’ with a formidable push on the establishment of indigenous manufacturing infrastructure, supported by a proven research and development ecosystem.

India is positioned as the third largest military spender in the world, with its defence budget accounting for 2.15 per cent of the country’s GDP. The GOI aims to achieve a turnover of $ 25 billion, including export of $5 billion in Aerospace and defence goods and services by 2025.

In 2021-22 defence exports from India, which grew by 334 per cent in last five years, touched $1.59 billion (Rs. 13,000 crore). Now the Centre has set a target of Rs. 40,000 crore. India exports to over 75 countries due to collaborative defence services efforts.

With the government’s initiatives, the expenditure on defence procurement from foreign sources which used to be 46 per cent of the overall expenditure has reduced to 36 per cent in the last four years.

The government’s target in Rs 1.75 lakh crore of defence production by 2025, including Rs 35,000 crore generated from exports. In 2020-2021 and in keeping with the Atamnirbhar Bharat spirit, 74 per cent of contracts by army were awarded to Indian vendors, which is a praiseworthy development.

The Centre has approved continuation of the Central sector umbrella scheme ‘Border Infrastructure and Management’ (BIM) over the 15th Finance Commission cycle from 2021-22 to 2025-26, at a cost of Rs. 13,020 crore to strengthen border infrastructure. India has around 194 defence tech startups building innovative tech solutions to empower and support the efforts. An MoU was signed between Indian Navy and Larsen and Toubro (L&T) to engage the latter as a knowledge partner for nurturing technologies in various domains, for induction into the Navy. The MoU encompasses all aspects related to electrical, weapon, engineering, machinery and control, and hull of naval warship.

Indian Navy is focused on incorporation of Artificial Intelligence (AI) and Machine Learning (ML) in critical mission areas. The government has established two Defence Industrial Corridors in Uttar Pradesh and Tamil Nadu. The value of defence exports during the financial year 2021-22 has been Rs. 12,815 crore. The nodal agency for Uttar Pradesh Defence Industrial Corridor (UPDIC) has signed 69 MoUs with a potential investment of Rs. 10,545 crore. Actual investment of Rs 1,767 crore has been made by industries in UPDIC.

The nodal agency for Tamil Nadu, Defence Industrial Corridor (TNDIC) has arranged investment worth Rs. 11,359 crore through MoUs with 42 industries, whereas actual investment of Rs. 3,176 crore has been made by TNDIC units. Till October 2022, around 595 industrial licences have been issued to 366 companies operating in the defence sector, which explains the focus area of the government.