Current Production and Budget Trends
India’s defence production value for FY24 stood at Rs 74,739 crore, a decrease from Rs 1.09 lakh crore in FY23, following a historic high in the previous fiscal year. The private sector’s share increased to Rs 16,411 crore, accounting for 22% of the total defence production in FY24, up from 19% in FY23, yet not reaching the levels of the prior year. The interim Union Budget for FY24-25 allocated Rs 6.21 lakh crore to the Ministry of Defence (MoD), a 4.72% increase from the previous year, albeit a marginal reduction from the revised estimates. Defence expenditure constituted 13% of the total government spending and remained under 2% of the GDP.
Setting Ambitious Goals and Making Strategic Changes
Union Defence Minister Rajnath Singh, upon beginning his second term on June 13, emphasized the MoD’s goal of significantly increasing defence exports. “Defence exports had touched a record Rs 21,083 crore in FY24. It was historic. Our target will be to export over Rs 50,000 crore worth of defence equipment by FY29,” Singh stated, reiterating the ambitious target set earlier this year.Singh had previously indicated that India’s annual defence production is expected to reach Rs 3 lakh crore by FY29, with military hardware exports potentially hitting Rs 50,000 crore. Pushan Sharma from CRISIL Market Intelligence and Analytics considers this target feasible despite execution challenges. Sharma noted, “The shift towards indigenization will aid in reducing dependence on foreign armaments in cases of geopolitical conflicts.”Vivek Krishnan of SSS Defence supports the target, saying, “The target is very realistic. Every goal may encounter execution challenges, yet having no goal is even more detrimental. Historically, nations with ambitious targets have fared better, and there’s room for an even more optimistic outlook. TV Chowdhary of Premier Explosives is confident that the Rs 50,000 crore export target is attainable, considering the existing export orders for systems such as Akash, Pinaka, and BrahMos. “All large industrial houses of India have set up defence manufacturing units and are working towards this goal,” Chowdhary remarked. He added, “The simplified and time-bound process by DGFT and SCOMET for issuing licenses for export has made the defence exports possible.”
Investing in Innovation and the Private Sector
The Indian government is promoting innovation by supporting young entrepreneurs and startups in the defence sector. Recent policy changes, such as liberalizing procurement processes for startups and easing payment terms, reflect this commitment. The MoD aims for a turnover of Rs 1.75 lakh crore in aerospace and defence manufacturing by 2025.
The private sector plays a crucial role in this transformation. Vivek Krishnan points out, “The private sector has been taking on the lion’s share of defence production and capacity building for almost a decade. The private sector expects to cover over 50% of India’s defence production over the next decade.”
The Necessity of a 25% Annual Growth in Defence Budget
Experts argue that India’s defence budget needs a substantial increase to meet its strategic goals. Despite a marginal rise in the interim Union Budget, defence allocations are still below global standards. “The budget should allocate more for areas where we gain big by creating IP in design,” says Vivek Krishnan.
He went on to say, “India needs a 25% year-on-year increase in its defense capital acquisition budget primarily to become self-reliant in defense equipment across land, sea, and air domains within the next decade. Given the volatile regional security environment and ongoing conflicts that have affected defense technology and modernization globally—even in advanced economies—this growth is crucial.”
“Additionally, India’s defense budget is significantly smaller compared to China’s, which is estimated to be 5-7 times larger. To address this imbalance and enhance our defence capabilities, rapid indigenization and fortification of war stocks are essential. A 25% increase in the capital acquisition budget is therefore both necessary and justified.”
“It is also important to recognize that defense procurements are complex and multi-staged processes, with tangible results often emerging over a decade as the armed forces adapt and develop tactics around the new equipment.”
Dr. Laxman Kumar Behera, Associate Professor at JNU, suggests, “To meet the needs of a modern military, the current budget should prioritize increased spending on technology and capital procurement. Presently, defence spending is around 2% of GDP, with plans to increase it to 2.5% over the next few years.”
Broadening Product Assortment and International Markets
India has seen growing interest from countries like Vietnam, the Philippines, and Armenia for advanced Indian-manufactured weapons such as BrahMos missiles and Tejas aircraft. These exports are expected to enhance India’s geopolitical strategy in the Asia-Pacific region and beyond.
Vivek Krishnan highlights, “Countries seeking cutting-edge Indian-manufactured weapons like the BrahMos missiles, Pinaka multiple rocket launchers, and Akash anti-aircraft missiles will contribute to skyrocketing exports in the next five years.”
Strategies to Enhance Defence Exports
To achieve its ambitious export targets, India must implement a strategic roadmap that includes:
Increased Budget Allocation: A 25% annual growth in the capital acquisition budget is essential for supporting production and modernization efforts. “Future wars will hinge on space and satellite capabilities,” stressed Vivek Krishnan. “These areas merit increased funding, alongside investments in artificial intelligence to streamline human-machine interfaces.”
Strengthened Private Sector Engagement: Enhancing private sector contributions through supportive policies and incentives. “The government’s declaration of defence production as a thrust area and the release of a positive indigenization list by the Honorable Raksha Mantri have spurred private sector participation,” Vivek Krishnan affirmed. He emphasized, “The temporary decline in FY24 is overshadowed by long-term commitments and advancements.”
Enhanced Export Strategies: Implementing measures to increase defence exports and attract global clients. “Strategic partnerships safeguard critical technologies,” Vivek Krishnan remarked. “Long-term collaborations foster trust and expedite technology acquisition, crucial for modernization.”
Fostering Innovation and R&D: Investing in research and development to advance indigenous technologies and reduce reliance on imports. TV Chowdhary notes, “The Government’s declaration of defence production as a thrust area and the release of the positive indigenization list has driven private companies to participate in increased production.”
Boosting Domestic Productions
The shift towards self-reliance involves boosting domestic manufacturing and reducing dependency on foreign suppliers. The government aims to allocate 75% of the capital acquisition budget for procurement from local sources. Initiatives like the Defence Industrial Corridors and positive indigenization lists are part of this strategy.
“The Positive Indigenization list and initiatives like the DcPP Programme of DRDO are pivotal,” said Vivek Krishnan. “They bolster domestic R&D and promote self-reliance in defence technologies.”
Future investments in capital expenditure and R&D are expected to enhance India’s defence capabilities and strategic positioning. The goal to nearly triple annual defence production and more than double exports by FY29 reflects a strong commitment to building a self-reliant and technologically advanced defence sector.
“Our goal is to pioneer advanced technologies that offer strategic advantages,” Vivek Krishnan emphasized. “This approach prioritizes innovation over conventional self-sufficiency.”
India’s future defense strategy encompasses significant initiatives such as the development of the indigenous Kaveri turbofan engine, Agni-VI and K-5 missiles, and the advancement of hypersonic cruise missile technology. These projects are pivotal in bolstering India’s defense capabilities and securing readiness against emerging threats.
India’s defense sector is on the brink of transformative growth, fueled by increased budget allocations, strategic reforms, and a robust focus on indigenous development and exports. As the country maneuvers through intricate geopolitical terrains, realizing these ambitious goals will be crucial in strengthening India’s role as a pivotal player in the global defense arena.
