The Indian defence manufacturing industry is a significant sector for the economy. Demand growth is likely to accelerate with rising concerns of national security. Growth was observed in the value of production by Defence PSUs due to numerous key product developments through research and development initiatives, in addition to various products and equipment being manufactured through transfer of technology.

The defence manufacturing sector has seen some major developments, investments and support from the Government in the recent past.

India’s defence production stood at Rs. 17, 885 crore (US$ 2.24 billion) in FY 2022-23 (until 1 August, 2022)

The 3rd Edition of Vietnam India Bilateral Army Exercise “Ex VINBAX 2022” is scheduled to be conducted at Chandimandir from 1-20 August 2022.

Defence exports in the country stood at Rs. 1,381 crore (US$ 173.32 million) in FY 2022-23 (until 1 August, 2022)

Indigenously developed Laser-Guided Anti-Tank Guided Missiles (ATGM) were successfully test-fired from Main Battle Tank (MBT) Arjun by Defence Research and Development Organisation (DRDO) and Indian Army at KK Ranges with support of Armoured Corps Centre & School (ACC&S) Ahmednagar in Maharashtra on August 04, 2022.

Foreign Direct Investment (FDI) equity inflow in the defence sector for April 2000-March 2022 stood at US$ 12.51 million as per data released by the Department for Promotion of Industry and Internal Trade (DPIIT).

In June 2022, the Ministry of Defence approved the procurement of military equipment and platforms worth Rs. 76,390 crore (US$ 9.84 billion) from domestic industries.

In June 2022, Ministry of Defence signed a deal for the Astra Mk 1 Beyond Visual Range (BVR) AAM and associated equipment, at a cost of Rs. 2,971 crore (US$ 382.79 million).

The Startup Incubation and Innovation Centre, IIT-Kanpur (SIIC IIT-Kanpur) recently signed an MoU with Defence Innovation Organisation (DIO) to nurture and support start-ups and SMEs in the defence sector through its flagship programme iDEX Prime.

The government has established two Defence Industrial Corridors (DICs) in the country, one in Uttar Pradesh called the Uttar Pradesh Defence Industrial Corridor (UPDIC) and the other in Tamil Nadu called the Tamil Nadu Defence Industrial Corridor (TNDIC), with the goal of attracting Rs 10,000 crore (US$ 1.31 billion) in investment in each.

100% FDI is allowed in the defence industry, wherein 74% is allowed the under automatic route and beyond 74% is through the government route.

In the Union Budget 2022-23: Ministry of Defence has been allocated Rs. 525,166 crore (US$ 67.66 billion), which includes expenditure on salaries of armed forces and civilians, pensions, modernisation of armed forces, production establishments, maintenance, and research and development organisations.

In November 2021, Defence Acquisition Council (DAC) boosted the ‘Make in India’ initiative by according Acceptance of Necessity (AoN) — to capital acquisition proposals worth Rs. 7,965 crore (US$ 1.07 billion) — for modernisation and operational needs of armed forces.

In November 2021, the Defence Research and Development Organisation (DRDO), India and Directorate of Defence Research and Development (DDR&D), Ministry of Defence, Israel, entered a Bilateral Innovation Agreement (BIA) to promote innovation and R&D in start-ups and MSMEs of both countries for development of dual use technologies.

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.

India is also developing high-altitude long-endurance unmanned aircrafts for surveillance and reconnaissance applications.

The Indian Defence sector which is the second largest armed force in the world offers a promising growth journey ahead.

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). The Defence Ministry has set a target of 70% self-reliance in weaponry by 2027, creating huge prospects for industry players. The defence ministry estimates potential contract worth Rs. 4 lakh crore (US$ 57.2 billion) for the domestic industry in the next 5-7 years (2025-2027).