India aims to set up US$26bn defence industry by 2025

Union Defence Minister, Shri Rajnath Singh, has assured the private sector of all government support in realising their full potential in the Indian defence manufacturing space

September 17, 2019

Defence manufacturing has been identified as one of the most prominent activities under “Make in India” to build a US$5-trillion economy by 2024-25

Since 2014, several international defence and aerospace companies have set up operations in India to cater to the local as well as export markets

There are nine defence public sector units, 41 ordnance factories, 50 dedicated R&D labs and many others in the Indian defence manufacturing space

The Government has prepared a plan to promote Artificial Intelligence (AI) in national security to develop the nation as a significant power in defence AI

Union Defence Minister, Shri Rajnath Singh, has said that the Indian Government was committed to working towards achieving a US$26 billion defence industry by 2025. Addressing the second annual session of the Society of Indian Defence Manufacturers in New Delhi on September 17, he said that the defence sector has been identified as one of the most prominent sectors under “Make in India” initiative to build a US$5-trillion economy by 2024-25. Underlining the need to reduce reliance on arms imports, Mr Singh said that several steps have been taken to make India a major defence manufacturing hub and a net exporter. The Government would not hesitate to initiate more measures, if required, he added.

Over the past five years, several international defence and aerospace companies have set up operations in India to not just cater to the local market but also export globally. India’s defense production policy reflects the resolve of the government to achieve a US$26-billion defence industry with an anticipated investment of US$10 billion in aerospace and defence goods and services by 2025. This will also provide employment to about 2-3 million people. Simplification of procedures for defence exports has resulted in the export of over US$1.5 billion in 2018-19, which is nearly seven times the export achieved in 2016-17. Meanwhile, a target of US$5 billion for defence exports has been set by the government for 2024.

Vast manufacturing capacity

The Indian Government has introduced many far-reaching reforms since 2014 to create an ecosystem where private and public sectors contribute together as per their respective strength and experience.

The reforms have touched almost all aspects of defence production and procurement, Mr Singh added. There are nine defence public sector units (PSUs), 41 ordnance factories, 50 dedicated R&D labs and many other establishments in the Indian defence manufacturing space. There are also about 70 license holding private companies. They have a dedicated workforce of 170,000 people. Additionally, over 8,000 MSMEs are currently engaged in defence production. Efforts are on to double this count to 16,000.

The defence minister said that the government has simplified the industry licensing process, increased the FDI cap and taken necessary steps to promote defence exports. The defence offset policy has also been streamlined and government-owned trial and testing facility has been provided to the private sector. Two defence industrial corridors have been launched in Tamil Nadu and Uttar Pradesh. Under the “Make” procedure, to date, 40 industry development proposals have received in-principle approval. Eight such projects would have an estimated value of US$285 million in the next five years. As against 215 Defence licenses issued till 2014, the number of Defence licenses issued has gone up to 440 by March 2019.

New technologies in defence R&D

Underscoring the symbiotic relationship between innovation and enterprises to flourish manufacturing in today’s fast-moving world, Mr Singh said that the Innovation for Defence Excellence (IDEX) platform has been launched to promote innovation and technology development. Under this, 44 winners have been chosen in 14 projects under two defence innovation startup challenges (DISC). Referring to the strong IT-ITes industry of the country, the defence minister said that a road map has been prepared to promote Artificial Intelligence (AI) in national security to develop the nation as a significant power in defence AI. The central government has planned to develop 25 Defence Specific AI products by 2024.

The defence minister added that steps are being taken to make defence manufacturing sector self-reliant and a new transfer of technology (ToT) policy is under the process that will pave the path of transferring DRDO-developed technologies to the industry. A new policy on the use of DRDO patents by the industry is under consideration to promote and motivate defence industry for innovation. He mentioned that till now over 900 ToT licencing agreements have been signed with the industry which is a major step towards making defence manufacturing sector self-reliant. Mr Singh assured defence manufacturers from all possible support from the government to realise their ambitions in the Indian defence sector.

Revised defence procurement

The Government of India has revised the defence procurement process in 2016 to stimulate the growth of domestic defence space. A new category ‘Buy {Indian-IDDM (Indigenously Designed, Developed, Manufactured’)} was introduced to promote indigenous design and development of Defence equipment. In recent times most of the capital procurement approvals by the Defence Acquisition Council were given under indigenous development and production. A strategic partnership model has also been introduced in procurement to ensure that the private sector makes big-ticket items like Fighter Aircraft, Helicopters, Submarines and armored vehicles. This will help Indian private firms to evolve into global giants.

Mr Singh said that the government was open to new ideas and is committed to fully harness the energies, entrepreneurship spirit and enterprise of the private sector in the defence sector.