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A recent report by Antique Stock Broking presented during the "Defence Conference 3.0," highlights significant growth and potential in India's defence sector. The report points to two major factors driving this trend. First, is the global move towards a "China+1" strategy and the ongoing Russia-Ukraine war, both of which have opened up opportunities for India to step into supply chain gaps within the global defence industry.
Surge in Defence Exports
India's defence exports have seen an impressive surge by growing from Rs 15 billion in 2017 to Rs 210 billion in 2024. This represents a compound annual growth rate (CAGR) of 46%. The report emphasises that India’s ambition to become a global defence manufacturing hub is supported by a diverse group of players including Defence Public Sector Undertakings (DPSUs), private companies, start-ups, and small and medium-sized enterprises (MSMEs).
China+1 and Russia-Ukraine War: Catalysts for Growth
The global "China+1" strategy where companies seek to diversify their supply chains away from a heavy reliance on China has created new avenues for India. Additionally, disruptions caused by the Russia-Ukraine war have further highlighted gaps in global defence supply chains. India is now well-positioned to fill these spaces, potentially increasing its contribution to the global defence market.
Strengthening Domestic Defence Manufacturing
The report emphasizes that India’s long-term success as a defence manufacturing hub hinge on building a strong domestic ecosystem. A crucial element of this strategy is reducing the import content in defence products, which can accelerate project approvals and minimize international conflicts related to sourcing.
Government Initiatives
The Ministry of Defence has implemented several key initiatives to foster growth in the sector. These include the establishment of aerospace parks and defence corridors, fast-tracking project approvals, and enhancing development and testing facilities. Such measures are designed to attract both Indian private sector players and global Original Equipment Manufacturers (OEMs).
Potential in the MRO Sector
India’s Maintenance, Repair, and Overhaul (MRO) segment holds significant potential, particularly for global aerospace companies. With its technical expertise and cost-competitive solutions that India is emerging as a favourable destination for MRO services, further boosting the country's position in the global defence industry.
The report suggests that with the right ecosystem and policies, India could further elevate its status in the global defence sector by leveraging both internal capabilities and external geopolitical shifts.
India’s Growing Aerospace and Defence Sector
India is emerging as a significant player in the Maintenance, Repair, and Overhaul (MRO) segment of the aerospace industry by presenting a wealth of opportunities for global aerospace companies. This potential is largely attributed to the country's specialized expertise and cost-effective solutions which stand out when compared to international competitors.
Ambitious Goals for Domestic Defence Production
The Indian government has set ambitious targets for the domestic defence sector by aiming to achieve a turnover of Rs 3 lakh crore by 2029. Additionally, the government plans to boost defence exports to Rs 500 billion. This growth is crucial for India as it is currently the largest importer of defence equipment in the world. By increasing domestic production, India hopes to significantly lower its import costs thereby alleviating the financial burden on the national budget.
Atmanirbhar Bharat Initiative: Supporting Local Players
A key component of this strategy is the Atmanirbhar Bharat initiative, which translates to "self-reliant India." Under this initiative, the government has reserved 75% of the defence capital expenditure for domestic manufacturers which is a substantial increase from the 49% allocation in the fiscal year 2021. This shift not only encourages local companies to participate in defence production but also aims to strengthen the national economy by fostering homegrown industries.
Investment in Modernization and Procurement
In light of ongoing geopolitical challenges and the pressing need to modernize its Armed Forces, India plans to invest a staggering Rs 8.3 lakh crore in domestic procurement. This investment offers vast business opportunities for local enterprises as the government aims to place significant orders through domestic channels. The report emphasizes that this initiative represents a monumental chance for Indian companies to engage in the defence sector, ultimately contributing to national security and economic growth.
Record Growth in Defence Manufacturing
Recent statistics from the Ministry of Defence reveal that India’s defence manufacturing sector experienced remarkable growth with an increase of 16.8% in the fiscal year 2023-24. This surge marks the highest growth rate in the history of the country’s defence production with the total production value reaching Rs 1,26,887 crore, a substantial rise from the previous year. This impressive growth emphasizes the potential of the Indian defence industry and its capability to meet both domestic and international demands.
In India’s commitment to enhancing its aerospace and defence sectors presents a promising landscape for both local and global players. With strategic initiatives like Atmanirbhar Bharat and significant investments in procurement and production, the country is ready to transform its defence capabilities while simultaneously driving economic growth. As India continues to develop its expertise and infrastructure in this field, it stands ready to emerge as a challenging force in the global aerospace and defence market.
Boosting India's Defence Manufacturing Capabilities: A Comprehensive Approach
In recent years, the Indian government has taken significant steps to promote self-reliance in defense manufacturing by recognizing the importance of developing a robust ecosystem and supportive policies. The Ministry of Defence has set an ambitious target of achieving a turnover of $26 billion in aerospace and defense manufacturing by 2025 with $5 billion in exports. As of April 2023, a total of 606 industrial licenses have been issued to 369 companies operating in the defense sector by demonstrating the growing interest and participation in this crucial industry.
Defence Production and Export Promotion Policy 2020 (DPEPP)
To provide a focused and structured approach to defense production capabilities, the Ministry of Defence has formulated the Draft DPEPP 2020. This policy serves as a guiding document for the ministry, aiming to significantly boost the country's defense production capabilities for self-reliance and exports. By implementing this policy, India aims to reduce its dependence on imports and become more self-sufficient in meeting its defense needs.
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