India’s shipbuilding industry plays a critical role, not just for maritime trade but also for the country’s defence preparedness. It encompasses the construction, repair, and maintenance of vessels used for transportation, defence, and commerce. With a coastline spanning over 7,500 km, the maritime sector is vital for India’s trade — handling 95% of trade by volume and 70% by value through sea routes. Yet, despite its strategic importance, India continues to rely heavily on foreign nations for shipbuilding, resulting in higher costs.
Let’s take a closer look at India’s shipbuilding sector and the emerging investment opportunities.
Current State of India’s Shipbuilding Sector
As of 2024, India’s shipbuilding industry is valued at $1.12 billion — a notable increase from just $90 million in 2022. However, the country still holds a minor position in the global shipbuilding arena, ranking 22nd with a market share of less than 1%. In comparison, China, South Korea, and Japan command a staggering 93% of the global shipbuilding market.
China, South Korea, and Japan dominate 93% of the global shipbuilding market, while India’s share remains below 1%.
When it comes to ship carrying capacity, India’s contribution is modest. As of December 2023, it holds only 1.2% of global ship ownership, compared to Greece’s 17.8%, China’s 12.8%, and Japan’s 10.8%. Moreover, a mere 0.77% of the world’s ships are registered under the Indian flag.
Major Challenges
High Infrastructure Costs: Shipbuilding is a capital-heavy industry requiring significant investment in shipyards. With long gestation periods and uncertain returns, the sector appears risky to many investors.
Technological & Workforce Gaps: Indian shipyards struggle with outdated technology and a shortage of skilled manpower, making it difficult to stay globally competitive.
Supply Chain Disruptions: The industry depends heavily on imports for crucial components like engines, propulsion systems, and navigation equipment. This not only raises costs and delays timelines but also increases vulnerability to global supply chain shocks.
Cost Disadvantages: Compared to peers like China, South Korea, and Japan, Indian shipyards face 25–30% higher costs. Contributing factors include low labour productivity, expensive financing, and limited access to domestically produced high-grade steel and other materials.
Regulatory & Financial Constraints: Environmental regulations, lack of direct subsidies, and high interest rates hinder growth. Meanwhile, international competitors enjoy strong governmental support and incentives.
Government Initiatives to Boost Shipbuilding in India
To revitalise the sector, the Indian government has rolled out a range of policy measures:
Infrastructure Status: The shipping sector is expected to be granted infrastructure status, enabling companies to access funding on better terms. This will facilitate domestic ship acquisitions and bolster Indian shipyard operations.
Shipbuilding Financial Assistance Policy (SBFAP): This policy offers financial support to shipbuilders to help neutralise cost disadvantages and improve global competitiveness.
Maritime Development Fund (MDF): A dedicated fund of Rs 250 billion (~$2.9 billion) has been launched to provide long-term, low-cost finance for shipbuilding and related infrastructure. The government will contribute 49% of the fund, while the rest will come from ports and private investors.
Tax Exemptions: Import duties on inputs used for shipbuilding and shipbreaking have been waived for another 10 years, reducing costs for domestic players.
Shipbreaking Credit Note Scheme: This initiative incentivises the dismantling of older vessels at Indian yards by issuing credit notes, thereby encouraging fleet renewal and promoting sustainability.
Role of Shipbuilding Sector in India’s Defence Sector
India’s shipbuilding capability is a strategic asset for its defence forces. The sector focuses on building indigenous warships, embracing advanced technologies, and reducing dependence on foreign military hardware.
Indian shipyards have successfully delivered several naval assets, including the Kalvari-class submarines developed with French collaboration. Other contributions include the production of frigates and corvettes that strengthen coastal defence.
With China expanding its footprint in the Indian Ocean, India has responded by ramping up domestic naval production. Notably, the government has sanctioned a Rs 450 billion ($5.4 billion) project to develop two nuclear-powered attack submarines.
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What’s Next?
The Ministry of Ports, Shipping, and Waterways envisions India becoming a top 10 global shipbuilding hub by 2030 under the Maritime India Vision 2030. The government’s revised financial assistance policy aims to raise the share of Indian-built ships in the domestic fleet from 5% to 7% by 2030 and a remarkable 69% by 2047.
Looking even further ahead, Vision 2047 targets India’s inclusion among the top five ship-owning nations with 100 million gross tonnage (GT). It also aims to scale up shipbuilding capacity from 0.1 million to 4.5 million gross tonnes per annum (GTPA). Achieving this will require strategic partnerships with nations like South Korea and Japan for investment and technology transfer in shipbuilding and repair infrastructure.
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