The government will encourage private actors in defense manufacturing


The defense industry sector, which had hitherto been restricted to the public sector, was opened 100% to Indian private sector participation in May 2001. According to government officials, since the opening of the defence, a total of 584 industrial licenses were issued to 358 enterprises for the manufacture of various defense articles. The initial validity of the industrial license granted under the Industries (Development and Regulation) Act has also been extended from 03 years to 15 years. The increase in the validity of industrial licenses has provided enough time and space for companies to start operations and manufacture without hindrance.

Key initiatives

In order to give impetus to the national defense industry, the government has taken several policy initiatives in recent years and introduced reforms to encourage the indigenous design, development and manufacture of defense equipment in the country, thus expanding the production of indigenous defense equipment. to strengthen our armed forces. These initiatives include, among others, prioritizing the procurement of equipment from domestic sources under the Defense Acquisition Procedure (DAP)-2020; Announcing 18 major defense platforms for industry-led design and development in March 2022; Notification of three “positive indigenization lists” of a total of 310 items of services and two “positive indigenization lists” of a total of 2,958 items of defense public sector companies (DPSU), for which there would be an embargo on the import beyond the deadlines indicated against them.

The Ministry of Defense has reformed the process of simplifying the industrial licensing process with a longer validity period. Liberalization of the foreign direct investment (FDI) policy authorizing 74% FDI automatically.

In terms of streamlining defense and procurement policies, the government has also simplified the manufacturing procedure.

In the field of defense research and development, the Ministry of Defense launched the Innovations for Defense Excellence (iDEX) program involving start-ups and micro, small and medium-sized enterprises (MSMEs). As part of the iDEX, several projects have been initiated to encourage defense start-ups.

On the road to indigenization, the ministry reformed the Implementation of Government Procurement (India Manufacturing Preference) Order 2017 and launched an indigenization portal named SRIJAN to facilitate indigenization through the Indian industry, including MSMEs.

The government has also reformulated the offset policy and given a new direction to the offset policy emphasizing investment attraction and technology transfer for defense manufacturing by allocating higher multipliers.

To attract defense investment and innovation, the ministry has also set up two defense industrial corridors, one in Uttar Pradesh and one in Tamil Nadu.

Opening up defense research and development (R&D) to industry, start-ups and academia, with 25% of the defense R&D budget allocated to promoting defense technology development in the country.

The government has also increased the defense budget allocation to military modernization for procurement from domestic sources.


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