INDIAN DEFENCE MANUFACTURING
INDIAN DEFENCE MANUFACTURING
The Indian defence manufacturing industry is a significant sector for
the economy. The industry is likely to accelerate with rising concerns
of national security. Demand for defence equipment in India has been
growing due to the ongoing territorial disputes with Pakistan and
China over the ownership of the Northern State of Kashmir and the
North Eastern State of Arunachal Pradesh, respectively.
Over the last five years, India has been ranked among the top
importers of defence equipment to gain technological advantages over
rival countries such as China and Pakistan. To modernise its armed
forces and reduce dependency over external dependence for defence
procurement, several initiatives have been taken by the government to
encourage ‘Make in India’ activities via policy support
initiatives.
India’s defence manufacturing sector has been witnessing a CAGR of
3.9% between 2016 and 2020. The Indian government has set the defence
production target at US$ 25.00 billion by 2025 (including US$ 5
billion from exports by 2025). Defence exports in India was estimated
to be at US$ 1.29 billion in 2019-20. India’s defence import value
stood at US$ 463 million for FY20 and is expected to be at US$ 469.5
million in FY21. Defence exports in the country witnessed strong
growth in the last two years. India targets to export military
hardware worth Rs. 35,000 crore in the next 5 years. As of 2019, India
ranked 19th in the list of top defence exporters in the world by
exporting defence products to 42 countries.
Foreign Direct Investment (FDI) equity inflow in the defence sector
for April 2000 - March 2021 stood at Rs. 61.52 crore as per data
released by the Department for Promotion of Industry and Internal
Trade (DPIIT).
In June 2021, Defence Minister, Mr. Rajnath Singh, approved a proposal
for the construction of six submarines at an estimated cost of Rs.
43,000 crore. He also approved proposals regarding capital
acquisitions of several equipment for modernisation and operational
requirements at an estimated cost of Rs. 6,000 crore. To boost the
Indian Government’s ‘self-reliant’ India initiative in June 2021,
Defence Minister, Mr. Rajnath Singh, approved the budgetary funds
worth Rs. 498.8 crore to Innovations for Defence Excellence (iDEX), a
Defence Innovation Organisation (DIO) for the next five years. The
government is also inviting foreign players to invest in India and
capitalise on the ‘Make in India’ opportunity. In June 2021, Defence
Minister, Mr. Rajnath Singh, invited Swedish companies to invest in
defence corridors in Uttar Pradesh and Tamil Nadu.
On May 12, 2021, PM CARES Fund approved the procurement of 150,000
units of ‘Oxycare’—SpO2-based oxygen supply system developed by the
Defence Research and Development Organisation (DRDO) at a cost of Rs.
322.5 crore. On May 17, 2021, the Defence Ministry unveiled the first
batch of anti-COVID drug, 2-deoxy-D-glucose (2-DG) developed by the
Institute of Nuclear Medicine and Allied Sciences (INMAS), a lab of
Defence Research and Development Organisation (DRDO), along with Dr.
Reddy’s Laboratories (DRL), Hyderabad.
In April 2021, Under the Development cum Production Partner (DcPP)
programme, Defence Research and Development Organisation (DRDO)
allowed private sector firms to develop and produce missile systems,
such as vertical launched surface and air missile system programmes,
to promote the domestic defence industry. In April 2021, Defence
Research and Development Organisation (DRDO) developed an advanced
chaff technology to safeguard the naval ships against a missile
attack. Defence Laboratory Jodhpur (DLJ), a DRDO laboratory, has
indigenously developed three variants of this critical technology,
namely short-range chaff rocket (SRCR), medium-range chaff rocket
(MRCR) and long-range chaff rocket (LRCR) that meet Indian Navy’s
qualitative requirements. This successful development of advanced
chaff technology by DLJ is another step towards ‘Atmanirbhar
Bharat’.
In April 2021, Defence Research and Development Organisation (DRDO)
Defence Materials and Stores Research lab and Development
Establishment (DMSRDE), Kanpur, developed a lightweight bullet proof
jacket (BPJ), which weighs 9.0 kilogrammes and meets qualitative
requirements of the Indian Army. In April 2021, Defence Research and
Development Organisation (DRDO) developed single crystal blades
technology and supplied 60 of these blades to Hindustan Aeronautics
Limited (HAL), as part of their indigenous helicopter development
programme, for helicopter engine application. In March 2021, the
Defence Ministry signed a Rs. 1,188 crore (US$ 161.2 milion) contract
with Bharat Dynamics Ltd. (BDL) and defence public sector enterprise
(DPSE) for manufacturing and supplying the French-origin MILAN-2T
Anti-Tank Guided Missiles.
In March 2021, the Defence Ministry signed a Rs. 1,056 crore contract
with Mahindra Defence Systems (MDSL) for supply of 1,300 light
specialist vehicles to the Indian Army. In February 2021, the Defence
Ministry was allocated Rs. 70,000 crore for domestic procurement in
2021-22. In February 2021, Ministry of Defence (MoD) and Defence
Public Sector Undertaking (DPSU) Bharat Electronics Limited (BEL)
signed a contract for procurement of Software Defined Radio Tactical
(SDR-Tac) worth Rs. 1,000 crore.
In February 2021, at Aero India 2021 in Bengaluru, Hindustan
Aeronautics Limited (HAL) and Mishra Dhatu Nigam Limited (MIDHANI)
signed a memorandum of understanding (MoU) for development and
production of composite raw materials. In January 2021, the Institute
of Nuclear Medicine and Allied Sciences (INMAS), a Delhi-based DRDO
laboratory, presented Rakshita, a bike-based casualty transport
emergency vehicle to Central Reserve Police Force (CRPF). To boost the
‘Make in India’ initiative in June 2021, the Defence Acquisition
Council (DAC) approved proposal for the construction of six submarines
under the strategic partnership (SP) model at an estimated cost of
~Rs. 43,000 crores.
On June 29, 2021, the Indian Navy signed an MoU with Bharat
Electronics Limited to create a joint technology incubation forum
(TIF).
Government formulated the ‘Defence Production and Export Promotion
Policy 2020’ to provide impetus to self-reliance in defence
manufacturing under the ‘Aatmanirbhar Bharat’ scheme. The ministry
aims to achieve a turnover of Rs. 1 lakh 75 thousand crore, including
an export of Rs. 35 thousand crore in the aerospace and defence goods
and services by 2025.
To encourage more participation from start-ups and micro, small &
medium enterprises (MSMEs) in Defence Research & Development
(R&D) in achieving the ‘Atmanirbhar Bharat’ goal, the Defence
Minister Mr. Rajnath Singh released a new version of ‘Defence Research
and Development Organisation (DRDO) Procurement Manual 2020’ on
October 20, 2020. There are plans to establish new infrastructure
including a defence park in Kerala to manufacture defence equipment
for the armed forces. The project is aimed at promoting MSMEs and
boosting the ‘Make in India’ initiative. In November 2020, the
Department of Defence, in partnership with the DGDE and Armed Forces,
established a land management system (LMS) as part of efforts to
enhance the overall defence land management. In February 2021, Defence
Research and Development Organisation (DRDO) handed over Licensing
Agreements for ToT (LAToT) for 14 DRDO developed technologies to 20
industries at Aero India 2021 in Bengaluru.
To increase defence manufacturing in India and make the country a
reliable weapon supplier to friendly countries, the Indian government
allowed the following FDI limits in September 2020. For new licensees
- FDI allowed up to 74% through automatic route; FDI beyond 74% would
need to be permitted under the Govt. route. For existing Licensees -
Infusion of new foreign investments up to 49% can be added by making
declarations of change/transfer within 30 days.
Defence ministry plans to put 101 defence items (artillery guns and
assault rifles) under import embargo to offer potential military
hardware manufacturing opportunities to the Indian defence industry.
In February 2020, Defence Minister Rajnath Singh at Aero India 2021
announced to reduce defence imports by at least US$ 2 billion by
2022.
The defence ministry estimates potential contract worth Rs. 4 lakh
crore for the domestic industry in the next 5-7 years (2025-2027). To
boost the domestic defence sector manufacturing, the Ministry of
Defence, in December 2020, approved the export of
indigenously-developed surface-to-air Akash missile system and set up
a panel to ensure faster approvals for acquisition proposals by
various countries.
The Indian government is focussing on innovative solutions to empower
the country’s defence and security via ‘Innovations for Defence
Excellence (iDEX)’, which has provided a platform for start-ups to
connect to the defence establishments and develop new
technologies/products in the next five years (2021-2026). Working
through partner incubators, iDEX has been able to attract the start-up
community to participate in the Defence India Start-up Challenge
(DISC) programme. The Defence Ministry has set a target of 70%
self-reliance in weaponry by 2027, creating huge prospects for
industry players. Introduced Green Channel Status Policy (GCS) to
promote and encourage private sector investments in defence production
to promote the role of private sector in defence production.
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