Defence minister Rajnath Singh on Wednesday announced at Aero India 2023, Asia’s biggest military airshow, that India has earmarked 75% of this year’s defence capital procurement budget for buying weapons and systems from local manufacturers — a move aimed at unlocking new opportunities for achieving self-reliance targets and ramping up the country’s defence exports.
The share of the domestic sector in the defence budget was never higher. India set aside 68% of the military’s capital acquisition budget for making indigenous purchases in 2022-23, 64% in 2021-22, and 58% in 2020-21.
Singh called the decision an unprecedented step taken by the government at the outset of Amrit Kaal (the 25 years leading to India’s independence centenary) to accelerate the growth of the domestic defence sector and cut down military imports.
“If you take one step, the government promises to take 10 steps forward. You spoke of land to run on the path of development. We are providing you full sky. Earmarking three-fourths of the capital procurement budget for the local industry is a step in that direction,” he said. His comments came during a Bandhan (bonding) ceremony at which several partnerships were announced.
In the Union Budget announced on February 1, India set aside ₹5.94 lakh crore for defence spending in 2023-24, with the allocation almost 12% higher than that in last year’s budget estimates, and about 2% more compared to that in the revised estimates for 2022-23. India allocated ₹5.25 lakh crore for military spending in last year’s budget, ₹4.78 lakh crore in 2021-22, and ₹4.71 lakh crore the year before.
Around ₹1 lakh crore has been set aside for domestic procurement this year, compared to ₹84,598 crore, ₹70,221 crore and ₹51,000 crore in the three previous years.
Categories where imports have been almost replaced by domestic products include warships, artillery guns, light combat aircraft, basic trainers, a variety of helicopters, radars, and different types of ammunition.
Singh said he was confident that the Indian industry will step forward with enthusiasm and contribute to making the defence sector more robust.
Inaugurating the airshow on Monday, Prime Minister Narendra Modi talked about the transformation the defence sector has undergone during the last eight to nine years, while placing special emphasis on the locally built Tejas light combat aircraft (LCA), the commissioning of India’s first indigenous aircraft carrier INS Vikrant last year, the setting up of a manufacturing facility by the Tata-Airbus consortium at Vadodara in Gujarat for C-295 medium transport aircraft, and the recent inauguration of the country’s largest helicopter manufacturing facility at Tumakuru in Karnataka.
“From here India will take rapid strides to be included among the largest defence manufacturing countries and our private sector and investors will play a big role in that,” Modi said.
Apart from creating a separate budget for buying locally made military hardware, the government has taken a raft of steps to promote self-reliance in the defence manufacturing sector including increasing foreign direct investment (FDI) from 49% to 74%, and notifying hundreds of weapons and systems that cannot be imported.
Singh, on Sunday indicated that India could bring more weapons and systems under an import ban, and manufacture them in the country to give a new push to self-reliance, with the latest “positive indigenisation list” set to come on the back of four similar lists that have barred the import of 411 military items during the last 30 months.
The first four lists, announced in August 2020, May 2021, April 2022 and October 2022, have imposed a phased import ban on weapons that are planned to be indigenised over the next five to six years, creating more opportunities for the domestic sector.
Weapons and systems that cannot be imported include artillery guns, missile destroyers, ship-borne cruise missiles, light combat aircraft, light transport aircraft, long-range land-attack cruise missiles, basic trainer aircraft, multi-barrel rocket launchers, a variety of helicopters, assault rifles, sniper rifles, mini-unmanned aerial vehicles, next-generation corvettes, and airborne early warning and control (AEW&C) systems.
Military hardware sought to be developed locally also ranges from light tanks, naval utility helicopters and mounted artillery gun systems to medium altitude long endurance unmanned aerial vehicles, missiles and loitering munitions. Import substitution of ammunition, which is a recurring requirement, has been given special emphasis in the previous lists.
India has set a target of achieving defence exports worth $5 billion by 2025.
The airshow seeks to project India as a defence manufacturing hub and showcase the country’s rising prowess in the aerospace and defence sector. The participants include more than 800 defence firms, representatives of around 100 foreign countries, 32 defence ministers, air chiefs of 29 air forces and 73 foreign and Indian CEOs.
The domestic defence production sector will now have to tap the new opportunities and deliver, said Air Marshal Anil Chopra (retd), director general, Centre for Air Power Studies.
“Earmarking more funds for the domestic defence production sector is a welcome move, but it should not be at the cost of the operational capabilities of the Indian armed forces,” Chopra added.
The move to reserve 75% of budget for capital procurement for the private sector is laudable, and an endorsement of the government’s focus on indigenisation, said Neeraj Gupta, managing director of leading Indian defence firm MKU Ltd.
“It will provide a major boost to Aatmanirbharta and be the driver for growth. The only caveat being the execution on ground,” Gupta added.