Defence production beats ₹1 lakh crore mark on back of crucial reforms

India on Friday announced that the value of defence production in the country crossed ₹1 lakh crore for the first time on the back of key reforms to spur growth in the sector that holds vast potential.

The value of defence production by state-run companies and the private sector has almost doubled over the past five years that saw the government take a raft of measures to cut the country’s dependence on military imports and strengthen its position as an exporter of weapons and systems, officials aware of the matter said, asking not to be named.

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The figure stood at ₹1,06,800 crore in financial year 2022-23 compared to ₹95,000 crore in FY 2021-22 and ₹54,951 crore five years ago, the officials said.

The value of defence production in FY 2022-23 has crossed ₹1 lakh crore for the first time due to the defence ministry’s consistent efforts, and it is expected to climb further after private defence firms submit their data, the ministry said in statement. The value of defence production has grown by 12% compared to last year.

India produces a raft of weapons and systems, including the Tejas light combat aircraft (LCA), different types of helicopters, warships, tanks, artillery guns, warships, missiles, rockets and a variety of military vehicles. A category-wise break-up of defence production was not immediately available.

India has sharpened its focus on the defence manufacturing sector during the last five years and taken several measures to achieve self-reliance. These include banning the import of a range of weapons, systems and parts, creating a separate budget for buying locally made military hardware, increasing foreign direct investment from 49% to 74% and improving ease of doing business.

The results are beginning to show, experts said.

The value of defence production was ₹54,951 crore in 2017-18, ₹50,499 crore in 2018-19, ₹63,722 crore in 2019-20, ₹88,631 crore in 2020-21 and ₹95,000 crore in 2021-22, according to defence ministry data.

The government is working with the defence industry and its associations to remove hurdles and promote defence production, and several policy reforms have improved ease of doing business, including the integration of micro, small & medium enterprises (MSMEs) and start-ups into the supply chain, the statement said.

“Due to these policies, the industries, including MSMEs and start-ups, are forthcoming in defence design, development and manufacturing and there is almost a 200% increase in the number of defence licenses issued in the last 7 to 8 years,” the statement said. These measures have given a boost to the defence industrial manufacturing ecosystem and generated employment opportunities, it added.

The increase in defence production also follows the corporatisation of the Ordnance Factory Board (OFB), India’s main producer of weapons and military equipment, in 2021 to boost its efficiency and competitiveness in a long-awaited reform.

India is eyeing a turnover of ₹1,75,000 lakh crore in defence manufacturing by 2024-25. “Steps taken for Atmanirbharta (self-reliance) in defence are beginning to show results, and if we continue to pursue indigenisation at the current pace, we are on course to achieve the target of ₹1,75,000 lakh crore in two years,” said Air Marshal Anil Chopra (retd), director general, Centre for Air Power Studies.

The ministry has given out the value of defence production for 2022-23 days after it announced a new list of 928 defence items, including replacement units, sub-systems, components and spares, that will come under a phased import ban between December 2023 and December 2029. The list includes items used in fighter planes, trainer aircraft, warships and different types of ammunition.

It came after three similar positive indigenisation lists were published by the defence ministry in December 2021, March 2022 and August 2022. The four lists consist of 4,666 items of which 2,736 items, with an import substitution value of ₹2,570 crore, have thus far been indigenised.

The components and sub-systems in the previous lists include several items for fighter jets, Dornier-228 planes, multiple systems for submarines, equipment for T-90 and Arjun tanks, BMP-II infantry combat vehicles, warships and submarines, and anti-tank missiles. These lists seek to indigenise the defence items over the next five to six years.

India has employed a two-pronged approach to achieve indigenisation through import bans.

One approach relates to banning the import of weapons and systems such as fighter jets, warships, helicopters and artillery guns, while the other covers sub-systems, spares and components that are part of bigger weapon platforms.

As part of the former, India has published four other lists that have imposed a phased import ban on 411 different types of weapons and platforms including light weight tanks, naval utility helicopters, artillery guns, missiles, destroyers, ship-borne cruise missiles, light combat aircraft, light transport aircraft, long-range land-attack cruise missiles, basic trainer aircraft, airborne early warning and control (AEW&C) systems, and multi-barrel rocket launchers.

These lists were announced during the last three years --- in August 2020, May 2021, April 2022 and October 2022. Import substitution of ammunition, which is a recurring requirement, has been given special emphasis in these lists.

Setting aside budget for India-made weapons and systems is one of the key measures to boost self-reliance. Around ₹1 lakh crore was set aside for domestic procurement in this year’s defence budget, compared to ₹84,598 crore, ₹70,221 crore and ₹51,000 crore in the three previous years.

The corporatisation of OFB, which earlier controlled 41 ordnance factories, has spurred defence production. In 2021, it was split into seven government-owned entities that now produce ammunition and explosives, vehicles, weapons and equipment, troop comfort items, opto-electronics gear, parachutes and ancillary products. These new companies are Advanced Weapons and Equipment India Limited, Troop Comforts Limited, India Optel Limited, Munitions India Limited, Avani Armoured Vehicles, Gliders India Limited and Yantra India Limited.

India’s arms imports fell 11% between 2013-17 and 2018-22, but the country is still the world’s top importer of military hardware, said a report published by Swedish think tank Stockholm International Peace Research Institute in March.

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The country’s focus is not only on cutting dependence on imports, but also on boosting exports. India exported military hardware worth ₹15,920 crore in FY 2022-23, the highest ever and a notable tenfold increase since 2016-17 when the figure stood at a mere ₹1,521 crore.

India is currently exporting military hardware to around 85 countries, with around 100 firms involved in the exports. It includes missiles, artillery guns, rockets, armoured vehicles, offshore patrol vessels, personal protective gear, a variety of radars, surveillance systems and ammunition. Weapons and systems that hold export potential include the LCA, different types of helicopters, Astra beyond-visual-range air-to-air missile and tanks.

India is exporting bullet-proof jackets to 34 countries including Australia, Japan, Israel and Brazil, ammunition (ranging from 5.56mm to 155mm) to around 10 countries including the United Arab Emirates, Egypt, Indonesia and Thailand, fast interceptor boats to Mauritius, Seychelles and the Maldives, and defence electronics to countries like the US, the UK and France, the officials said. A category-wise break-up was not immediately available.

The exports stood at ₹4,682 crore in 2017-18, ₹10,745 crore in 2018-19, ₹9,115 crore in 2019-20, ₹8,434 crore in 2020-21, and ₹12,814 crore in 2021-22, according to defence ministry data.

India is in talks with Egypt and Argentina for the possible sale of LCA to their air forces. Egypt has projected a requirement for 20 aircraft while the South American country needs 15 new fighters. Hindustan Aeronautics Limited is also looking at exporting the Dhruv advanced light helicopter to the Philippines.

Last year, BrahMos Aerospace and the Philippines signed a deal worth almost $375 million for the Philippine Marines to buy three batteries of the BrahMos supersonic cruise missiles, and Kalyani Strategic Systems Limited won an export order worth $155.5 million for supplying 155mm artillery guns, the first such order for an Indian firm.

India has set a defence export target of ₹35,000 crore by 2024-25.