Defence Manufacturing

Growth Drivers

  • Defence Production Policy, 2011 to encourage indigenous manufacture of defence equipment. Defence Procurement Procedure (DPP) has been amended to provide for the following :
    1. Preference to ‘Buy (Indian)’ and ‘Buy and Make (Indian)’ over ‘Buy (Global)’.
    2. Simplification of the procedure for ‘Buy and Make (Indian)’.
    3. Clear and unambiguous definition of indigenous content.
    4. Provision for Maintenance TOT to Indian Industry partners.
  • Defence products list for industrial licensing, has been articulated in June 2014, wherein large numbers of parts/components, castings/forgings etc. have been excluded from the purview of industrial licensing. The same is available at the DIPP’s website,
  • The defence security manual for the private sector defence manufacturing units has been finalised and put in public domain by the Department of Defence Production. The manual clarifies the security architecture required to be put in place by the industry while undertaking sensitive defence equipments.
  • The MAKE procedure, which aims to promote R&D in the industry with support from the government and the placement of orders (if R&D effort is successful), is also being revised to make it more attractive and unambiguous for the private sector.

Reasons to Invest

  • India’s current requirements on defence are catered largely by imports. The opening of the strategic defence sector for private sector participation will help foreign original equipment manufacturers to enter into strategic partnerships with Indian companies and leverage the domestic markets and also aim at global business. Besides helping build domestic capabilities, this will bolster exports in the long term.
  • Opportunities to avail defence offset obligations to the tune of approximately INR 250 Billion during the next 7-8 years.
  • The offset policy (which stipulates the mandatory offset requirement of a minimum 30% for procurement of defence equipment in excess of INR 3 Billion) introduced in the capital purchase agreements with foreign defence players would ensure that an eco-system of suppliers is built domestically.
  • The government policy of promoting self-reliance, indigenisation, technology upgradation and achieving economies of scale and developing capabilities for exports in the defence sector.
  • The country’s extensive modernisation plans, an increased focus on homeland security and India’s growing attractiveness as a defence sourcing hub.
  • High government allocation for defence expenditure.
Defence Manufacturing

Foreign investors