Defence Production Hit Record High

The country recorded its highest-ever growth in indigenous defence production in value terms during Financial Year (FY) 2023-24

• The value of defence production in the country has gone up to a record-high figure of ₹1,26,887 crore, reflecting a growth of 16.7% over the defence production of the previous financial year
• The value of defence production in FY 2022-23 was ₹1,08,684 crore.

Some Key Facts

• Last 5 Years Growth: In the last five years (since 2019-20), the value of defence production has been increasing steadily, and grown by over 60%, the statement added.
• Defence Exports: Defence exports touched a record-high of ₹21,083 crore in FY 2023-24, reflecting a growth of 32.5% over the last fiscal when the figure was ₹15,920 crore.
• Self-reliance In Defence: The feat has been achieved due to the policy reforms, initiatives and ease of doing business brought in by the government in the last 10 years with focus on attaining self-reliance. Of the total value of production [VoP] in 2023-24
  • Defence Public Sector undertakings (DPSUs)/other PSUs contributed:   About 79.2% 
  • Private Sector: 20.8% 
    • In terms of absolute value, both DPSUs/PSUs and private sector have recorded a steady growth in defence production

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Need for Indigenisation of Indian Defence Sector

• Helps In Era Of uncertainty: Goals of Atmanirbhar Bharat (self-reliant India) and Make In India would mitigate risks on account of disruption or manipulation of critical supply chains. 
  • For example: The kind of challenges that have constrained Ukraine in its conflict with Russia.
• High Imports: Stockholm International Peace Research Institute (SIPRI) reported that  India was the world’s second-largest importer of major arms in 2014-18 and accounted for 9.5% of the global total and India’s military expenditure rose by 3.1%.
  • India remains the largest importer of arms in the world, accounting for 11 per cent of global arms imports during 2018-22.
• Economic drain: The defence Budget of India has seen a consistent and notable increase over the past few financial years. 
  • This year, India allocated ₹6.21-lakh crore to the Ministry of Defence. This is 13 per cent of the total Budget expenditure.
  • However, the allocation for FY25 is just about 1.9 per cent of the GDP. 
• Hostile Neighbours: The presence of hostile neighbours like China and Pakistan makes it improbable for India to boost its self-defence and preparedness.

Challenges in Indigenisation of Indian Defence Sector

• Meeting India’s procurement requirements:  Despite the government’s efforts and an ambitious production target of US$26 billion by 2025, production has not grown significantly enough to meet the annual procurement requirements of the armed forces. = 
• On the export front: Despite registering a noticeable increase in international arms sales, the industry is way off the target set by the government.
  • For instance: Hindustan Aeronautics Limited, the biggest defence company in India, could not win an international competition for its light combat aircraft Tejas fighter in Malaysia, which selected a Korean alternative
• Lack of technological depth: Despite having a large production and R&D base, lacks the technological depths to design/manufacture major systems and critical parts, components, and raw materials, which are eventually imported.
  • The lack of technological depth is also one of the reasons why the Indian government still prefers to licence manufacture many major systems.
  • Licencing manufacturing: It has an overwhelming share of 58 percent in India’s defence procurement, indicating the extent of India’s external dependency.
• Many Reforms are yet to be implemented in full letter and spirit: This has created a condition where the time between reform announcements and their translation to actual contract, production, and delivery is unduly prolonged. 
• • Delays in implementation will remain a key challenge in the foreseeable future.

Initiatives taken by Government

• Defence Production and Export Promotion Policy 2020 (DPEPP): It’s  guiding document of MoD to provide a focused, structured and significant thrust to defence production capabilities of the country for self-reliance and exports.
  • The policy has laid out following goals and objectives:
    • To achieve a turnover of Rs 1,75,000 Crores (US$ 25Bn) including export of Rs 35,000 Crore (US$ 5 Billion) in Aerospace and Defence goods and services by 2025.
    • To develop a dynamic, robust and competitive Defence industry, including Aerospace and Naval Shipbuilding industry to cater to the needs of Armed forces with quality products.
    • To reduce dependence on imports and take forward “Make in India” initiatives through domestic design and development.
    • To promote export of defence products and become part of the global defence value chains.
    • To create an environment that encourages R&D, rewards innovation, creates Indian IP ownership and promotes a robust and self-reliant defence industry.
• Seven New 100% Government-Owned Corporate Entities: Following its policy of Atmanirbhar Bharat, the government took the historic decision to convert the Ordnance Factory Board (OFB), a subordinate office of the Ministry of Defence, into seven new 100% government-owned corporate entities with professional management
  • Earlier:  41 ordnance factories in the country came under the OFB and many were in losses and performing poorly. 
• In 2020, the Ministry of Defence (MoD) prepared a list of 101 items: This to be produced indigenously for which the imports would be banned. 
  • Department of Defence Production notified four positive indigenisation lists consisting of 4,666 items.
• Msmes And Startups Emerging As Key Partners:  Department of Defence is moving fast and steadily towards the indigenisation goal, with 40 to 50 licences being issued every year in defence production. 
  • Not just big private groups such as Tata and Adani are involved in defence production but the government has been encouraging MSMEs and startups too.
• Innovations for Defense Excellence (iDEX):  It is an initiative by the Government of India to modernise the nation’s Defense industry.
  • It will empower a culture of technology co-creation and co-innovation in the sector and boost innovation among the start-ups and encourage them to be a part of the ecosystem.
• Defence Corridors:  The Government of India has established two Defence Industrial Corridors:  UP Industrial Defense corridor and Tamil Nadu Defense corridor  to reduce dependence on imports, generate opportunities for domestic manufacturers and increase the export of indigenous equipment
• Launch of an indigenization portal namely SRIJAN:  To facilitate indigenisation by Indian Industry including MSMEs

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