Budget 2023: What Defence Manufacturing Industry Expects

The government had allocated Rs 5.25 lakh crore for the sector in the Union Budget 2022-23. (File)

New Delhi:

The Union Budget 2023-24 will be presented by Finance Minister Nirmala Sitharaman on February 1. The defence manufacturing sector is hoping that schemes and policy decisions announced by the minister will boost the output of the industry.

In the past few years, the central government has reduced imports while encouraging manufacturing in the defence sector. India’s defence exports have grown eightfold, from Rs 1,521 crore in 2016-17 to Rs 12,815 crore in 2021-22. The capital expenditure on imports by armed forces went down from 41.89% percent in 2019-20 to 36% in 2020-21. 

The government had allocated Rs 5.25 lakh crore for the sector in the Union Budget 2022-23. Domestic capital procurement accounted for 64% of the Defense Services Capital Acquisition Budget 2021-22. This was increased to 68% in the next financial year.

The Budget should encourage procurement from start-ups in the defence sector that have innovative products, according to industry insiders. Tax sops and GST waivers will encourage the industry to invest further in innovation in the defence manufacturing sector, they added. The defence manufacturing sector expects that fast-tracking of procurements will boost the growth of the industry in India.

In December last year, the Defence Ministry approved the procurement of arms worth Rs 84,328 crore to boost the combat capabilities of the defence forces. These included approval for six capital acquisitions for the Indian Army, 10 for Indian Navy, six for Indian Air Force, and two for Indian Coast Guard.

The government has also set up two Defence Industrial Corridors (DICs), one in Uttar Pradesh and one in Tamil Nadu. These have been established to attract investment of up to Rs 10,000 crore in each corridor. Emphasis has also been given on promoting exports and liberalisation of foreign investments. So far, four Positive Indigenisation Lists have been released by the Ministry of Defence. The list consists of various defence equipment that will be manufactured domestically.

The government has also launched Production Linked Incentive (PLI) schemes in 14 sectors, with a total investment of Rs 1.97 lakh crore. The scheme is aimed at boosting domestic manufacturing, investments, and exports. In September 2021, the scheme was extended to the manufacturing of drones and drone components.