Context
As per the CareEdge Ratings report, India’s defence sector production is set to grow at a compound annual growth rate (CAGR) of around 20% during FY24-FY29.
Major Highlights
Budget Allocation: India’s defence budget has consistently ranged between 1.90 to 2.8% of its gross domestic product (GDP).
For the fiscal year 2024-25, Rs 6.22 lakh crore has been dedicated for the defence sector.
Indigenous Manufacturing: Supported by initiatives like ‘Make in India,’ the country is steadily reducing its reliance on foreign suppliers and advancing its defence capabilities.
Defence Exports: Over the last six years ending FY24, Indian defence exports have grown at a CAGR of approximately 28%.
India’s defence exports will grow at an estimated rate of about 19% during the next 5 years (i.e. from FY24 to FY29).
India’s defence exports include various products, such as aircraft, naval systems, missile technology, and military hardware.
India’s Defence Export
India has set a defence export obyek of ₹50,000 crore by 2028-29.
Defence exports of India have touched Rs 21,083 crore in the FY 2023-24, a growth of 32.5% over the last fiscal year.
The private sector and the defence public sector undertakings (DPSUs) contributed around 60% and 40%, respectively, in exports from India.
The country is currently exporting military hardware to around 85 countries, with around 100 local firms involved.
According to the Stockholm International Peace Research Institute, between 2000 and 2023, Myanmar remained the largest importer of Indian weapons, accounting for 31% of India’s exports and Sri Lanka followed at 19%.
Mauritius, Nepal, Armenia, Vietnam, and Maldives were other major importers.
India’s defence production grew substantially from Rs 74,054 crore in 2016-17 to Rs 108,684 crore in 2022-23.
Out of this, 21.96% of the production was done by private companies.
Advantages of Growth in Defence Production
Self-defence: The presence of hostile neighbors like China and Pakistan makes it necessary for India to boost its self-defence and preparedness.
Strategic advantage: Self-reliance will make India’s geopolitical stance strategically stronger as a net security provider.
Technological advancement: Advancement in the defence technology sector will automatically boost other industries hence catapulting the economy further ahead.
Economic drain: India spends around 3% of GDP on defence and 60% of that is spent on imports. This leads to an immense economic drain.
Employment: Defence manufacturing will need the support of numerous other industries which generate employment opportunities.