"The Indian Defence sector, the second largest armed force is at the cusp of revolution. The Government has identified the Defence and Aerospace sector as a focus area for the ‘Aatmanirbhar Bharat’ or Self-Reliant India initiative, with a formidable push on the establishment of indigenous manufacturing infrastructure supported by a requisite research and development ecosystem. The vision of the government is to achieve a turnover of $25 bn including export of $5 bn in Aerospace and Defence goods and services by 2025.
India is positioned as the 3rd largest military spender in the world, with its defence budget accounting for 2.15% of the country’s total GDP. Over the next 5-7 years, the Government of India plans to spend $ 130 Bn for fleet modernisation across all armed services. As per Union Budget 2022-23,$ 70.6 bn was allocated to the Ministry of Defence. In line with the self-reliant India initiative, the share of domestic capital procurement, which was earmarked at 64% in 2021-22 has been enhanced to 68% of the Capital Acquisition Budget of the Defence Services for FY 2022-23.
To support the domestic defence industry the government aims to ensure transparency, predictability, and ease of doing business by creating a robust eco-system and supportive government policies. Towards this end the government has taken steps to bring about de-licensing, de-regulation, export promotion and foreign investment liberalisation. Ministry of Defence has also notified three 'Positive Indigenisation lists' comprising of 310 defence equipments to be manufactured locally. Additionally, to promote export and liberalise foreign investments FDI in Defence Sector has been enhanced up to 74% through the Automatic Route and 100% by Government Route.
The government has also announced 2 dedicated Defence Industrial Corridors in the States of Tamil Nadu and Uttar Pradesh to act as clusters of defence manufacturing that leverage existing infrastructure, and human capital. Further, to enable innovation within Defence & Aerospace eco-system there are supportive government schemes such as iDEX ((Innovations for Defence Excellence) and DTIS (Defence Testing Infrastructure Scheme).