Defence Manufacturing

  • 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. 
  • GOI aims to achieve a turnover of USD 25 Bn including export of USD 5 Bn in Aerospace and Defence goods and services by 2025.*
  • Defence exports reach an all-time high of approx. INR 16,000 crore in FY 2022-23, over 10-times increase since 2016-17. * 
Reasons to Invest
  • India is now exporting defence equipment to over 75 countries.*
  • GOI has approved the continuation of the Central Sector Umbrella Scheme of “Border Infrastructure and Management” (BIM) over the 15th Finance Commission Cycle from 2021-22 to 2025-26, at a cost of INR 13,020 crore to strengthen the border infrastructure for improving border management, policing and guarding the borders.
  • Indian Army unveils Six new ‘Make-II Projects’ spanning technologies across unmanned systems, technologies to counter such systems as well as emerging solutions for augmenting air defence capabilities.
  • Indian Navy is focused on the incorporation of Artificial Intelligence (AI) and Machine Learning (ML) in critical mission areas. 
  • 25 % of defence R&D budget has been earmarked for private industry and start-ups which will pave the way for innovation of new defence technologies in India.*

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Key Achievements
  • Over INR 2.71 lakh cr worth of procurement cleared in FY 2022-23 of which 99% will be sourced from Indian industries. *
  • Defence exports grew by 334% in the last five years. *
  • Till date, DRDO has signed 670 Licensing Agreement for Transfer of Technology (LATOT) under Transfer of Technology (ToT) scheme. *
  • India has emerged as a regional power and net security provider in the Indo-Pacific as its capacity to provide humanitarian assistance and disaster relief to its citizens as well as regional partners has grown in recent years.*
  • Defence production crosses INR 1 lakh cr. mark for the first time ever in FY 2022-23.*
  • To boost ‘Aatmanirbharta’ in defence, 164 Positive Indigenisation List items, with an import substitution value of INR 814 cr have been successfully indigenised by DPSUs.*
  • DRDO & Indian Army successfully conduct six flight-tests of Quick Reaction Surface to Air Missile system off Odisha coast.*
  • A successful training launch of a Short-Range Ballistic Missile, Prithvi-II was successfully carried out. The missile is a proven system and is capable of striking targets with a very high degree of precision. *
  • 835 Squadron (CG), an indigenous Advanced Light Helicopter (ALH) MK III squadron, was commissioned into Indian Coast Guard at its Air Enclave in Porbandar, Gujarat. The commissioning of this squadron marks a tremendous leap towards self-reliance in the field of Search and Rescue (SAR) and maritime surveillance. *
  • Centre of Excellence on Satellite & Unmanned Remote Vehicle Initiative (CoE-SURVEI) has developed an Artificial Intelligence-based software which can automatically detect change on ground, including unauthorised constructions and encroachments in a time series using Satellite Imagery. *
  • The fourth phase of Sea Trials for IAC has been successfully completed. The Indigenous design and construction of Aircraft Carrier has led to growth in indigenous design and construction capabilities, besides development of large number of ancillary industries, with employment opportunities for over 2000 CSL personnel and about 12000 employees in ancillary industries. *
  • Keel laid for first warship of ASW SWC Project being constructed at CSL, Kochi. *
  • DRDO successfully test fires indigenously developed laser-guided ATGMs. *
  • SRIJAN portal launched to promote indigenisation. 2600 defence items have been displayed on the portal for indigenisation. *
Recent Announcements

25th August 2023: Big boost to ‘Aatmanirbharta’ in defence: MoD inks Rs 19,000 crore contract with HSL for five Fleet Support Ships for Indian Navy.

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24th August 2023: DAC approves proposals worth Rs 7,800 crore to enhance operational capabilities of the Armed Forces.

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23rd August 2023: LCA Tejas successfully test-fires indigenous ASTRA Beyond Visual Range air-to-air missile off Goa coast.

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22nd August 2023: Indian Coast Guard signs MoU with Philippines Coast Guard on enhanced maritime cooperation; holds the first bilateral meet.

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  • Defence exports reach an all-time high of approx. INR 16,000 crore in FY 2022-23, over 10-times increase since 2016-17. *
  • India has around 194 defence tech startups building innovative tech solutions to empower and support the country’s defence efforts. *
  • The nodal agency for Uttar Pradesh Defence Industrial Corridor (UPDIC) has signed 69 MoUs with industry with potential investment of INR 10,545 crore. Actual Investment of INR 1,767 crore has been made by the industries in UPDIC.*
  • The  nodal agency for Tamil Nadu Defence Industrial Corridor (TNDIC) has arranged investment worth potential of INR 11,359 crore through MoUs etc. with 42 industries. Actual Investment worth INR 3,176 crore has been made by the industries in TNDIC. *
Growth Drivers
  • Enhancement of funding under the Technology Development Fund (TDF) scheme of the Ministry of Defence to INR 50 crore per project from INR 10 crore.*
  • Maiden successful flight-test of DRDO’s indigenous Power Take off Shaft critical to future fighter aircrafts conducted on LCA Tejas in Bengaluru. *
  • Defence Acquisition Council approves capital acquisition amounting to over INR 70,500 cr under Buy (Indian-IDDM) category i.e. (Indigenously Designed, Developed and Manufactured). *
  • MoD signs INR 19,600 crore contracts with Indian shipyards for acquisition of 11 Next Generation Offshore Patrol Vessels & six Next Generation Missile Vessels for Indian Navy. *
  • Ministry of Defence signed contracts for procurement of improved Akash Weapon System and 12 Weapon Locating Radars, WLR Swathi (Plains) for the Indian Army at an overall cost of over INR 9,100 cr. *
  • As a boost towards AatmaNirbharBharat, MDL has delivered three submarines in 24 months, for the Project-75.*
  • Department of Defence Production waives off Quality Assurance Charges which would make the defence products cost competitive in global market.*
  • Ministry of Defence has also notified three Positive Indigenisation Lists in respect of DPSUs, comprising 3,738 major Line Replacement Units/sub-system/ assemblies/sub-assemblies/components & spares with an embargo on their import from defined timelines. *
  • The Army Design Bureau on behalf of the Indian Army has signed a MoU with the Drone Federation of India to collaboratively work towards promoting research, development, testing and manufacturing of drones, counter-drone and associated technologies that can assist the Indian Army in its operations. *
  • A successful training launch of an Intermediate Range Ballistic Missile, Agni-4, was carried out. The launch validated all operational parameters as also the reliability of the system. The successful test reaffirms India's policy of having a 'Credible Minimum Deterrence' Capability. *
  • DRDO’s Technology Development Fund (TDF) for MSMEs & Startups to indigenize cutting-edge defence technologies. 163 Technologies being indigenized, USD 30 Mn funds sanctioned, 1703 experts and 5020 companies engaged. *
FDI Policy
  • FDI in the defence sector is allowed up to 74% through automatic route (from earlier 49%) for companies seeking new industrial licenses. FDI beyond 74% and up to 100% will be permitted under the Government route. *
  • The cumulative FDI equity inflow in the Defence industry is USD 15.78 mn during the period April 2000 to March 2023.*


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Sector Policy


  • Defence procurement is governed by the Defence Procurement Procedure (DPP).
  • The latest revision of DPP was released in March 2016.
  • DPP focuses on institutionalising, streamlining and simplifying defence procurement procedure to give a boost to the “Make in India” initiative.


  • The key objectives of the defence offset policy are to leverage capital acquisitions to develop the domestic Defence industry. The policy stipulates the mandatory offset requirement of a minimum of 30% for procurement of defence equipment by foreign defence players. It is applicable to categories of procurements where the estimated cost of the acquisition proposal is USD 286.04 Mn or more.


  • The initial validity period of industrial licenses has increased from 3 years to 15 years. It also has a provision to grant an extension for a period of 3 years.*
  • Guidelines for the extension of validity of industrial licenses have been issued. Partial commencement of production is treated as the commencement of production of all the items included in the licence.*


  • DAP 2020 encourages indigenous designing and manufacturing of defence items. The ‘Make’ Procedure aims to achieve the objective of self-reliance by involving greater participation of Indian industries including the private sector through the following mechanisms:
  • Make-I (Government Funded): This involves the design and development of equipment, systems, major platforms or upgrades thereof by the industry. Ministry provides financial support upto 70% of prototype development cost or a maximum INR 250 cr per Development Agency (DA).
  • Make-II (Industry Funded): This includes design & development and innovative solutions by Indian vendor, for which no Government funding is provided, but it has the assurance of procurement on successful prototype development.
  • Government has established two Defence Industrial Corridors, one each in the States of Uttar Pradesh and Tamil Nadu. The investments of INR 20,000 cr are planned in Defence corridors of Uttar Pradesh and Tamil Nadu by year 2024.


  • Scheme to boost domestic defence & aerospace manufacturing
  • INR 400 cr outlay to create state-of-the-art testing infrastructure in partnership with industry
  • Scheme was launched by RM in May 2020
  • Project consultant/officer can be contacted for clarification

Innovations for Defence Excellence (iDEX)*

  • An innovation ecosystem for Defence, namely “Innovations for Defence Excellence (iDEX)”was launched in April, 2018.
  • iDEX aims at creation of an ecosystem to foster innovation and technology development in Defence and Aerospace by engaging Industries including MSMEs, Start-ups, Individual Innovators, R&D institutes and Academia and provide them grants/funding and other support to carry out R&D which has potential for future adoption for Indian defence and aerospace needs.
  • INR 1,000 crore have been allocated for iDEX related purchases, which will be increased further in the future. INR 500 crore have also been allocated separately to support startups for the next five years.

Defence Production and Export Promotion Policy 2020 (DPEPP)*

  • Ministry of Defence (MoD) has formulated a draft DPEPP 2020 as guiding document of MoD to provide a focused, structured, and significant thrust to defence production capabilities of the country for self-reliance and exports.
  • Aero Engines: Focus on establishing an Aero Engine Complex for civil and military applications and developing core technologies for Aero Engines.
  • Maintenance, Repair & Overhaul: Leverage favorable tax rationalization measures to promote MRO sector and enable convergence between Civil and Military MROs.
  • Critical Technologies & Materials: List of Critical Technologies and Materials to be identified and R&D strategies to be developed to attain indigenization.

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Financial Support


  • The total budgetary allocation for FY 2023-24 towards the Ministry of Defence is INR 5.94 lakh cr.
  • The total budgetary allocation for FY 2023-24 towards the Defence Pensions is INR 1.38 lakh cr.


Investment Opportunities
  • In the Indian Defence Sector, investment opportunities are in the following areas: 16 
    • Supply chain sourcing opportunity
    • Modernization of armed forces
    • Infrastructure development 
    • Research and Development 
  • Defence products manufacturing - Indigenously designed, developed and manufactured (IDDM) is the new method of capital procurement 

Explore projects to invest in Defence Manufacturing sector >

Sector Reports
  1. Year End Review 2022: Ministry of Defence
  2. Global Innovation Index: An Indian Perspective
Foreign Investors
  • Airbus (France)
  • BAE India Systems (UK)
  • Pilatus (Switzerland)
  • Lockheed Martin (USA)
  • Boeing India (USA)
  • Raytheon (USA)
  • Israel Aerospace Industries (Israel)
  • Rafael Advanced Defense Systems Ltd. (Israel)
  • Dassault Aviation SA (France)
  • Department of Defence Production, Ministry of Defence
  • Department for Promotion of Industry & Internal Trade, Ministry of Commerce & Industry, Government of India
  • Department of Commerce, Ministry of Commerce & Industry, Government of India
  • Defence and Strategic Industries Association of India
  • Border Roads Organization 
  • Defence Investor Cell, Ministry of Defence

  • DRDO

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  2. “Ministry of Defence Annual Report 2018-19,” Ministry of Defence, 
  3. “Defence Budget 2020-21,” Ministry of Defence, PIB,
  4. “More than 180 contracts valued over Rs 1,96,000 crore signed with Indian Defence Industry since 2014”, Ministry of Defence, PIB,
  5. “Annual Report 2018-19,” Ministry of Defence,
  6. “Defence Expenditure as a part of GDP”, Ministry of Defence, PIB,
  7. “Defence Budget 2020-21,” Ministry of Defence, PIB,
  8. “FDI in Defence”, Ministry of Defence, PIB,
  9. “Defence Procurement Procedure 2016 – Capital Procurement,” Ministry of Defence,   
  10. PIB Release,
  11. Defence Procurement Procedure 2016 – Capital Procurement,” Ministry of Defence,
  12. “Defence Investor Cell,” Defence Investor Cell,
  13. “Industrial Licences to Defence Sector,” Ministry of Defence, PIB,
  14. “Defence Corridor,” Ministry of Defence, PIB,
  15. “Defence Budget 2020-21,” Ministry of Defence, PIB,
  16. “Annual Report 2018-19,” Ministry of Defence,
  17. “Defence Manufacturing – Industry Trends,” Invest India,
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  19. Defence Procurement Procedure 2016 – Capital Procurement,” Ministry of Defence,
  20. “Annual Report 2018-19,” Ministry of Defence,
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  22. “Annual Report 2018-19,” Ministry of Defence,
  23. “Year End Review – 2018 Ministry of Defence,” Ministry of Defence, PIB,
  24. Ministry of Defence, PIB,
  25. Factsheet on FDI - April 2000 to March 2022Department for Promotion of Industry and Internal Trade,
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