DEFENCE MANUFACTURING

FDI In Defense Manufacturing Sectors

The primary target of the Indian government is to achieve self-reliance in defence production. This has opened up the defence industry for private sector participation and is paving the way for foreign original equipment manufacturers to enter into strategic partnerships with Indian companies. India plans to spend $130 bn on military modernization in the next 5 years.

A Defence export strategy has been formulated with a view of facilitating Defence Public Sector Enterprises (DPSUs) and private defence players in exploring business opportunities abroad. Domestically produced defence platforms, equipment, and spares worth $317 mn were exported to over 28 countries in 2015-16.

When it comes to foreign direct investment in the defence sector in India, 100% FDI in defence is permitted.

100% FDI in defence manufacturing in India is allowed ; wherein 49% is allowed under automatic route and beyond 49% through Government route.

 

  • 1

    2nd largest armed forces in the world

  • 2

    Ongoing DRDO projects in India of worth $7.3 bn

  • 3

    30% offset requirement for procurement of equipment in excess of $307.69 mn

5.3% increase in defence allocation was recorded in budget 2017-18 compared to budget 2016-17

The allocation towards defence in budget 2017-18 stood at $41 bn with $13.3 bn (or 31.7% of the total budget) reserved for capital expenditure

The total budget sanctioned for the Indian military for the financial year 2018-19 is $62.8 bn; accounting for 12.1% of the total Union Government expenditure for 2018-19

India’s share in global military expenditure stood at 3.3% in 2016

Service/ department-wise allocation as a percentage of total defence estimates 2017-18 (BE):

  • Army: 55.9%
  • Navy: 14.6%
  • Air force: 22.5%
  • DGOF (Directorate General of Ordnance Factories): 0.8%
  • DGQA (Director General of Quality Assurance): 0.5%
  • R&D: 5.7%

  • Defence exports strategy

    Liberalised process of issuing clearances
  • Online NOCs

    Started in November 2014 for industry friendliness
  • Shore Based Test Facility (SBTF)

    Improved test facilities leading to more local man
  • Indigenously Designed, Developed & Manufactured (IDDM)

    Focus – Buy and make IDDM, Indian over global
  • Modernization programmes

    $ 0.7 bn allocation for modernisation
  1. Oct 2018: Lockheed Martin to start producing Made-In-India F-16 wings in next 2-3 years.
  2. Mar 2018: New Tata-Boeing venture will roll out Apache chopper cabins from Hyderabad.
  3. Feb 2018: Sterlite, a global technology leader in web-scale digital networks, has been awarded a $539.0 mn Advance Purchase Order to design, build and manage the Indian Navy's communications network. This will give the Indian Navy digital defence supremacy at par with the best naval forces globally.
  4. Oct 2017: Eric Trappier, Chairman of Dassault Aviation and Anil D. Ambani, Chairman of the Reliance Group laid the Foundation Stone for the Dassault Reliance Aerospace Limited manufacturing facility in Mihan, Nagpur located in India’s western state of Maharashtra.

  • As per defence FDI limits <49% FDI allowed under automatic route
  • >49% FDI in defence sector allowed under government route
  • $5.1 mn FDI (in USD) in defence industries during April 2000 - December 2017

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