Daily News Analysis

Defence Production Hits Record High in 2023-24

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Key Highlights:

  • Record Production Value: India’s indigenous defense production reached a record high of ₹1.27 lakh crore in FY 2023-24, marking a 16.7% increase from the previous fiscal year.
  • Contribution by Sectors:
  • Public Sector: Defense Public Sector Undertakings (DPSUs) and other Public Sector Units (PSUs) contributed 79.2% of the total value of production.
  • Private Sector: The private sector accounted for 20.8% of the production value.
  • Defence Exports: India’s defense exports also achieved a record high of ₹21,083 crore, reflecting a 32.5% growth from the previous fiscal year’s ₹15,920 crore.

Government Measures to Enhance Defense Manufacturing:

  • Policy Reforms and Strategic Initiatives:
  • Defence Procurement Procedure (DPP):
  • Revised to boost indigenous manufacturing and increase procurement transparency.
  • Introduction of the ‘Buy (Indian-IDDM)’ category prioritizes products designed, developed, and manufactured indigenously.
  • Defence Production and Export Promotion Policy (DPEPP) 2020:
  • Requires foreign defense companies to invest part of their contract value in India, promoting technology transfer and local manufacturing.
  • Strategic Partnership Model:
  • Encourages foreign companies to partner with Indian firms, fostering technology transfer and domestic production.
  • Financial and Structural Support:
  • Foreign Direct Investment (FDI):
  • FDI limit increased to 74% through the automatic route and up to 100% with government approval for modern technology access.
  • Defense Corridors:
  • Two corridors established in Uttar Pradesh and Tamil Nadu to create a conducive manufacturing ecosystem and attract investments.
  • Budget 2023-24:
  • 75% of the defense capital budget earmarked for procurements from domestic sources.
  • Defence Offset Policy:
  • Encourages collaboration between Indian companies and foreign OEMs, supporting domestic manufacturing and technology transfer.
  • Infrastructure and Innovation:
  • Innovation for Defence Excellence (iDEX):
  • Initiative to support innovation in defense by engaging startups and MSMEs with financial support and a platform for showcasing solutions.
  • Technology Development Fund (TDF):
  • Provides grants to MSMEs, startups, and academia for R&D in defense technology and products.
  • Public-Private Partnership:
  • Ordnance Factory Board (OFB) Corporatization:
  • OFB restructured into seven new DPSUs to enhance autonomy, efficiency, and accountability.
  • Increased Role of Private Sector:
  • Private sector participation encouraged through measures like allowing private companies to bid for previously reserved contracts.

Future Goals and Projections:

  • Turnover Target: Aim to achieve a turnover of ₹1.75 lakh crore in aerospace and defense goods and services by 2025, including ₹35,000 crore from exports.

The record high in defense production and the various measures implemented reflect India's commitment to enhancing its defense manufacturing capabilities, promoting self-reliance, and fostering innovation in the sector

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