In a big push to defence manufacturing in India, 25 per cent of the research and development budget of the defence ministry will be earmarked for India’s private industry, start-ups and academia, Union Minister of Finance Nirmala Sitharaman announced in her budget speech on Tuesday.

Additionally, 68 per cent of the capital procurement budget has been earmarked for the domestic industry in 2022-23. This is aimed at boosting domestic manufacturing of defence equipment and reducing imports. In the previous budget, 63 per cent was earmarked for domestic procurement while in 2019-20 it was 58 per cent.

"Our government is committed to reducing imports and promoting Atmanirbharta in equipment for the Armed Forces. 68 per cent of the capital procurement budget will be earmarked for domestic industry in 2022-23," Sitharaman said.

She added that an independent nodal umbrella body will be set up to meet the wide-ranging testing and certification requirements of defence equipment.

"Defence Research and Development [R&D] will be opened up for [Indian] industry, startups and academia with 25 per cent of defence R&D budget earmarked. Private industry will be encouraged to take up design and development of military platforms and equipment in collaboration with DRDO and other organisations through strategic partnership model,” Nirmala Sitharaman said.

Industry Reacts

The Society of Indian Defence Manufacturing (SIDM), a body of 527 member companies, welcomed the announcement. “This will sustain investments and attract fresh capacity creation. Creation of a nodal body for setting up testing and certification requirements of defence systems and platforms will help domestic industry through faster processes and cost-efficiency. Allocation of 25 per cent of Defence R&D budget for start-ups, academia and private industry is a much-needed reform. We thank Ministry of Defence and Ministry of Finance for this major boost to research and innovation,” said SP Shukla, President of SIDM.

Goal of Self-Reliance

India has been looking at enhancing its defence exports, reducing imports and becoming self-reliant in the field. There has been a monumental increase in India’s defence exports — jumping from Rs 1,940.64 crore in 2014-15 to Rs 8,434.84 crore, the Ministry of Defence had said in December 2021.

India has set a target of exporting defence equipment worth Rs 35,000 crore ($5 billion) by 2025. Aimed at enhancing exports and building a domestic defence industry, the new policy aims at self-reliance and looks to achieve a turnover of Rs 1,75,000 crore (25 billion US dollars). The policy also aims at doubling domestic procurement from the Indian industry.

To promote self-reliance and reduce imports, the Ministry of Defence has also come out with a list of 2,851 items to put in an import embargo list in order to save Rs 3,000 crore annually.