Through the earmarked domestic defence budget, the government has given much needed order certainty to the Indian private sector

In addition to the massive capital budget reserved for Indian industry, FM Sitharaman has also announced an R&D budget of approximately $1.24 billion, of which 25% will be earmarked for private industry, start-ups and academia.

On February 1, 2022, Union Finance Minister Nirmala Sitharaman announced the budget for the financial year 2022-23, placing a strong emphasis on the growth and development of indigenous capabilities in the aerospace and defence sector (A&D sector).

With a total capital outlay of approximately $20 billion reserved for capital acquisitions of which a whopping 68% has been reserved for domestic procurement, the government has paved the way for domestic industry to rise to the occasion and break the cycle of India's disproportionate dependence on foreign players to meet the operational needs of our armed forces.

A very relevant precursor to the successively expanding domestic procurement budget is the "positive list" of items banned for defence imports, released by the Ministry of Defence in three iterations so far, and now spanning approximately 3,000 items.

Important items placed on the lists, for which imports are banned starting December 2020 and December 2021, include light combat helicopters, short-range surface to air missiles, cruise missiles, rockets and rocket launchers, radar warning systems, transport aircraft, armoured fighting vehicles, conventional submarines and various kinds of firearms and their ammunition.

In the coming financial year, it is likely that a bulk of the domestic capital procurement budget will be spent on items specified in the "positive lists", with the armed forces having already received in-principle approval for procurement of infantry combat vehicles ($3.5 billion), Arjun tanks ($1.1 billion), ALH Mark III helicopters ($515 million), terminally guided munitions ($165 million), anti-tank guided missile systems ($205 million), tactical communication systems ($490 million), software-defined radio ($43 million), light radars ($290 million), countermeasure systems ($700 million), ammunition of various kinds (over $800 million) among others.

Indian private players likely to benefit from these procurements include the Tata group, Mahindra Defence, Kalyani group, Larson and Tubro, Adani Aerospace & Defence, VEM Technologies, Tara Systems and Technologies, SEC Industries, Cyient, Alpha Design, Astra Microwave Products, Sigma Electro Systems, Economic Explosives, MKU, SSS Defence and Indo-MIM.

Tracing the history of the growth of A&D capabilities across geographies, it is clear that the biggest private players in the world have achieved their scale and sophistication relying on support from their respective governments, whether in the form of secured order pipelines or funding for research and development.

Through the earmarked domestic defence budget, the government has given much-needed order certainty to the Indian private sector.

In addition to the massive capital budget reserved for Indian industry, in her Budget speech, the Finance Minister has also announced an R&D budget of approximately $1.24 billion, of which 25% will be earmarked for private industry, start-ups and academia.

This, coupled with the other ideation related government initiatives, such as Innovation for Defence Excellence (iDEX) awards administered through the Defence Innovation Organisation, Defence India Start-Up Challenge and licensing of DRDO patents to the private sector, is exactly the kind of support the Indian private sector needs to achieve Atmanirbharta in the A&D sector.