India celebrates Army Day on 15th January every year. This day not only honours the courage and sacrifice of the Indian Army but also provides an opportunity to reflect on the progress and challenges of India’s defence sector. Recognised as one of the bravest forces globally, the Indian Army plays a pivotal role in defending the nation’s borders and responding to internal crises.
This article delves into the current state of India’s defence sector, the strides toward self-reliance, government policies, leading defence companies, and future plans.
The Current State of India’s Defence Sector
India ranks as the fourth-largest spender on defence globally. For FY2024-25, the Ministry of Defence was allocated Rs 6,21,940.85 crore (approximately USD 75 billion), announced by Finance Minister Nirmala Sitharaman on 23rd July 2024. Over the past decade, military expenditure has more than doubled, underscoring India’s commitment to enhancing its defence capabilities and pursuing the vision of a self-reliant India.
The primary goal of this increase is not only to strengthen the Army, Navy, and Air Force but also to develop a robust domestic defence industry.
Defence Production and Exports in India
India’s defence industry has witnessed remarkable progress in recent years. In FY2023-24, domestic defence production reached Rs 1.27 lakh crore, a 16.7% increase compared to FY2022-23 and a 60% growth since 2019-20. This is a significant step toward achieving self-reliance under the ‘Aatmanirbhar Bharat’ initiative.
India has also set a new benchmark in defence exports. From Rs 686 crore in 2013-14, exports surged to Rs 21,083 crore in 2023-24 — an astonishing 30-fold increase over a decade.
The country’s export portfolio has diversified, now including bulletproof jackets, helmets, Dornier (Do-228) aircraft, Chetak helicopters, high-speed interceptor boats, and lightweight torpedoes. India currently exports defence equipment to over 100 countries, including the USA, France, and Armenia.
India’s Journey Towards Self-Reliance
Indigenisation has become the cornerstone of India’s defence policy. Until the 1990s, India imported approximately 70% of its defence requirements. However, with initiatives like ‘Make in India’ and ‘Aatmanirbhar Bharat,’ domestic production has taken precedence, aiming to reduce import dependency and position Indian companies as competitive players in the global market.
Under the Defence Production and Export Promotion Policy (DPEPP) 2020, the government has set ambitious targets of USD 26 billion in domestic defence production and USD 5 billion in exports by 2025.
Challenges and Solutions
Despite significant achievements, the Indian defence sector faces several challenges:
- Import Dependency: India remains the largest global importer of arms.
- Technology Gap: Developing high-end technologies is still limited.
- Private Sector Involvement: Private companies are yet to be fully integrated into defence production.
- To address these challenges, increased investment in R&D and greater opportunities for private sector participation are essential.
Major Defence Deals and Plans
According to The Times of India, the government plans to finalise defence deals worth Rs 1.5 lakh crore by March 2025. These deals aim to bolster the strength of the Army, Navy, and Air Force.
Key proposals include acquiring 26 Rafale-Marine fighter jets and three Scorpene submarines from France, which will enhance naval strike capabilities. Additionally, plans are underway to procure 156 indigenous light combat helicopters (LCH) and 307 Advanced Towed Artillery Gun Systems (ATAGS), all to be manufactured in India, reinforcing the vision of a self-reliant India.
Stocks to Add to your Watchlist
Several Indian companies have played a pivotal role in advancing self-reliance in the defence sector. Here’s a snapshot of their performance:
This table shows the performance of some companies related to the defence sector in recent years.
Future Prospects of India’s Defence Sector
India’s defence expenditure is expected to grow at a CAGR of 8%, reaching approximately USD 130 billion over the next five years. This rising expenditure aligns with India’s strategy to strengthen security and reduce reliance on global supply chains.
A report by Nuvama highlights that geopolitical tensions, such as conflicts in Europe, the Middle East, and East Asia, indicate an increased focus on defence spending globally. In this context, India recognises that peace can only be ensured through a robust defence system.
The Ministry of Defence aims to achieve 70% self-reliance in weapons by 2027 and meet its 2025 targets of USD 26 billion in domestic production and USD 5 billion in exports.
With these measures, India is poised not only to achieve self-reliance but also to establish itself as a significant player in global defence exports.
*The companies mentioned in the article are for information purposes only. This is not an investment advice.
*Disclaimer: Teji Mandi Disclaimer
