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Market Reports

Defence Manufacturing Industry in India

UJA Market Reports- Defence Manufacturing Industry in India

1

Quick facts: Indian Defence Manufacturing

2

Overview: Defence Industry of India

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Key Players in Indian Defence Manufacturing / DPSUs

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Government Initiatives for Indian Defence Sector

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Major Milestones in Indian Defence Manufacturing

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Latest Investment News in Defence Sector

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Why India for Defence Investment?

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Our Team

Quick Facts: Indian Defence Manufacturing

  • The Ministry of Defence received the largest budget allocation for FY 2024-25 among all the ministries
  • Defence exports reached INR 227 billion in FY 2023-24, marking a 32.5% increase compared to the previous year
  • In the Interim Budget for 2024-25, an allocation of INR 238.5 billion was made to the Defence Research and Development Organisation (DRDO)
  • The defence budget for FY 2024-25 accounts for 13% of the total Union Budget, amounting to INR 6,453 billion, ranked as the fourth highest in the world
  • India is home to ~194 defence tech startups that are developing innovative technological solutions to strengthen and support the country’s defence capabilities
  • As of February 2024, companies in the defence sector have reported a total of INR 50.7 billion in Foreign Direct Investment
  • In the regular Union Budget for FY 24-25, the Ministry of Defence has been allocated INR 6,219.4 billion, the highest allocation among all ministries
  • The Indian government has set a defence production target of INR 2,159 billion by 2025, which includes INR 431 billion from exports.

Overview: Defence Industry of India

UJA Market Reports - Budget Allocation For Defence Sector Over Years (INR Bn)

  • India has become one of the world’s strongest military powers, with a focus on expanding its defence sector to strengthen national security and drive economic growth. The main sectors include military aircraft, naval vessels, and missiles, alongside helicopters, submarines, artillery, and land vehicles. Historically reliant on imports for about 65-70% of its defence needs, India now produces around 65% of its equipment domestically. In 2023-24, DPSUs/PSUs contributed 79.2% of production, with the private sector providing 20.8%. Defence production hit a record INR 1,325 billion in FY 2024, a 16% increase from the previous year, with 75% of procurement funds directed toward indigenous sources. India’s defence exports have grown over 30 times in the last decade, spanning over 100 countries, with top destinations being the USA, France, and Armenia. Key exports include bulletproof jackets, Dornier aircraft, Chetak helicopters, and lightweight torpedoes.

UJA Market Reports - Central Government Defence Expenditure Overview

Key Players in Indian Defence Manufacturing / DPSUs

There are sixteen Central Public Sector Undertakings under the administrative control of the Department of Defence Production, Ministry of Defence.

  1. Hindustan Aeronautics Limited (HAL)
  • Major manufacturer of aircraft, helicopters, engines, and avionics
  • Involved in both design and production of military and civilian aircraft
  1. Bharat Electronics Limited (BEL)
  • A navratna PSU under the Ministry of Defence, Government of India.
  • Focus on defence electronics like radars, weapon systems, and communication
  1. Bharat Dynamics Limited (BDL)
  • Specializes in manufacturing guided missiles, anti-tank weapons, and launchers
  • BDL is now engaged in the production of next-generation ATGMs, surface-to-air missile systems, strategic weapons, launchers, underwater weapons, decoys, and test equipment.
  • Partners with DRDO and foreign OEMs to manufacture and supply missiles and related equipment to the Indian Armed Forces.
  1. BEML Limited
  • A Mini Ratna Category-1 Public Sector Undertaking, under the Ministry of Defence, Government of India.
  • Involved in designing, developing, manufacturing, and marketing various defence equipment, including trucks, trailers, recovery vehicles, and weapon-loading systems.
  1. Mishra Dhatu Nigam Limited (MIDHANI)
  • Schedule B Mini-Ratna Category-I company under the Ministry of Defence.
  • It serves the needs of Defence, space, aeronautics, nuclear power, electronics, telecommunications, and various other strategic sectors in the country.
  1. Mazagon Dock Shipbuilders Limited (MDL)
  • Schedule A, Mini-Ratna Category-I Shipyard under the administrative control of the Ministry of Defence.
  • It constructs Missile Destroyers, Stealth Frigates and Scorpene Submarines for the Indian Navy.
  • Have built a total of 805 vessels since 1960, including 30 warships ranging from advanced destroyers to missile boats as well as 8 submarines.
  1. Garden Reach Shipbuilders and Engineers Ltd (GRSE)
  • Schedule B Mini-Ratna Category-I Shipyard under the administrative control of the Ministry of Defence.
  • The company mainly serves the shipbuilding needs of the Indian Navy and Coast Guard, producing vessels like tugs, warships, frigates, bulk carriers, research vessels, engines, and portable steel bridges.
  1. Goa Shipyard Limited (GSL)
  • Schedule B Mini-Ratna Category-I Shipyard under the administrative control of the Ministry of Defence.
  • Build sophisticated ships and explore new areas like hovercraft production and exports to foreign nations, while also providing ship repairs, refits, and general engineering services for shipbuilding and naval applications.
  1. Hindustan Shipyard Limited (HSL)
  • Catering to the needs of shipbuilding, ship repairs, submarine construction and refits, as well as the design and construction of complex and state-of-the-art offshore and onshore structures.
  • The shipyard has three independent business units viz. Shipbuilding, Ship Repairs and Submarine divisions with exclusive facilities and infrastructure.
  1. Advanced Weapons and Equipment India Limited (AWEIL)
  • Nation’s Ultimate Weapon System and military equipment Provider
  • Has eight production units, one skill development institute, and three research and development centers
  1. Gliders India Limited (GIL)
  2. Troop Comforts Limited (TCL)
  3. Armoured Vehicles Nigam Limited (AVNL)
  4. Munitions India Limited (MIL)
  5. Yantra India Limited (YIL)
  6. India Optel Limited (IOL)
UJA Market Reports - Total Production Value of Major DPSUs in FY2023-24 (INR Bn)

Government Initiatives for Indian Defence Sector

  • The Technology Development Fund (TDF) Scheme
    Launched by Defence Research and Under the ‘Make in India’ initiative, DRDO supports innovation in defence and dual-use technologies, focusing on MSMEs and start-ups. The Technology Development Fund (TDF) offers up to INR 100 million in funding, along with mentoring and support. DRDO covers 90% of the project cost, and successful products become eligible for ‘Buy-Indian’ procurement. As of January 2023, INR 1,200 million was allocated, with INR 430 million disbursed, supporting 16 MSMEs and 20 start-ups since 2022.
  • Positive Indigenisation List (PIL)
    In a major move to enhance India’s self-reliance in defence, the Ministry of Defence has released the fifth PIL, which includes 346 critical items, ranging from systems to raw materials. These items will be sourced exclusively from Indian industries, following the indigenization timelines on the Srijan portal. Launched in 2020, the portal encourages collaboration between DPSUs, MSMEs, and start-ups to support indigenization, with DPSUs tasked with developing or partnering for the production of these items.
  • iDEX Initiative
    The Government launched the Innovations for Defence Excellence (iDEX) framework to promote innovation and technology development in the Defence and Aerospace sectors. The initiative aims to engage various industries, including MSMEs, startups, individual innovators, R&D institutes, and academia, to foster self-reliance in defence. To support this, the Government has approved a central sector scheme with a budget of INR 4,980 million for the period from 2021-22 to 2025-26. The scheme is designed to provide financial assistance to nearly 300 startups, MSMEs, and individual innovators, as well as around 20 partner incubators through the Defence Innovation Organisation (DIO). For the financial year 2021-2022, the Government has allocated INR 450 million to iDEX-DIO.

Major Milestones in Indian Defence Manufacturing

  • Mission Divyastra
    The Defence Research and Development Organisation (DRDO) successfully tested the Agni-5 missile, which was developed in India and includes a new feature called the Multiple Independently Targetable Re-Entry Vehicle (MIRV) technology. This test, called Mission Divyastra, took place at Dr. APJ Abdul Kalam Island in Odisha. During the test, multiple radar and tracking stations followed the missile’s flight, and the test met all the expected results.
  • C295 program
    Airbus and Tata have developed a fully integrated industrial ecosystem in India for the C295 program, marking the country’s first private-sector aircraft manufacturing contract. This program will deliver 56 C295 aircraft to the Indian Air Force (IAF), which will become the largest operator of the aircraft. The C295 will replace the IAF’s ageing Avro fleet and serve across India’s expansive territory.
    A notable feature of the C295’s military transport version is the inclusion of an indigenous self-protection suite, which consists of radar warning systems, missile warning sensors, and countermeasure dispenser systems.
  • MQ-9B deal
    India has signed an INR 344 billion deal with the United States to acquire 31 MQ-9B Predator drones, boosting its surveillance and reconnaissance capabilities. The deal, facilitated through a government-to-government agreement, includes setting up maintenance facilities in India. This partnership also opens the door for US-India collaboration in developing next-generation combat drones, strengthening defence ties between the two nations amid ongoing global conflicts.
  • STEAG
    The Indian Army has established the Signals Technology Evaluation and Adaptation Group (STEAG) to enhance communication capabilities. The group aims to integrate advanced technologies like AI, 5G, 6G, Machine Learning, software-defined radios, Electronic Warfare systems, and quantum technologies to improve communication between units on the battlefield. This initiative focuses on strengthening Signals Intelligence (SIGINT) for tactical and operational missions.

Latest Investment News in the Defense Sector

  • In October 2024, the TATA Aircraft Complex, located at TATA Advanced Systems Limited (TASL) in Vadodara, Gujarat, was inaugurated. This state-of-the-art facility represents a major advancement in India’s efforts toward defence self-sufficiency. It is the first private-sector assembly line in India dedicated to the final production of military aircraft, specifically for the 56 C-295 transport aircraft.
  • In December 2023, Defence Secretary Mr. Giridhar Aramane inaugurated a new facility called the Aero Engine Research and Development Centre (AERDC) at Hindustan Aeronautics Limited in Bengaluru. The AERDC works on designing and creating different types of engines, like the Hindustan Turbo Fan Engine (HTFE) for training planes, drones, and regional jets, and the Hindustan Turbo Shaft Engine (HTSE) for light and medium helicopters.
  • In a significant step towards making India the ‘Global Hub for Green Shipbuilding’ by 2030, GRSE signed a Memorandum of Understanding with Shift Clean Energy, Seatech Solutions International, and the American Bureau of Shipping to develop Electric Tugs in November 2023, called E-VOLT 50. The goal of E-VOLT 50 is to lower carbon emissions, enhance operational efficiency, and set new standards for performance and environmental sustainability in the tugboat industry.
  • The Union Cabinet has given its approval to enter into a contract with Larsen & Toubro Limited for the purchase of three Cadet Training Ships, valued at a total of INR 31 billion, under the Buy {Indian-IDDM (Indigenously Designed, Developed, and Manufactured)} category. The delivery of these ships is expected to begin in 2026.

Why India for Defence Investment?

  • Prioritize Domestic Manufacturing
    In FY 2024, India allocated 75% of its defence capital procurement budget specifically for purchasing defence equipment and materials from domestic sources, rather than relying on imports. This move is part of the government’s push to strengthen self-reliance in the defence sector.
  • Fleet Modernization Investment
    India has committed to spending INR 11.2 trillion over the next 5 to 7 years to modernize its military fleet. This investment will go towards upgrading and acquiring new equipment for its defence forces, The aim is to improve operational efficiency and enhance India’s defence capabilities, ensuring the country is better equipped to face future security challenges.
  • Defence Manufacturing Network
    India has a robust defence industrial base consisting of over 350 major manufacturers and more than 10,000 MSMEs. This vast network presents significant opportunities for potential collaboration in the defence sector, offering a diverse range of products, technologies, and expertise to partner with.
  • FDI in Defence
    In 2020, the government raised the FDI cap to 74% via the Automatic Route for companies seeking new defence licenses, and up to 100% through the Government Route when it facilitates access to advanced technology, promoting investment and technological growth in the sector.

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