India is the seventh-largest economies in the world, with USD 2.264 trillion GDP in 2016 It is the fastest-growing economy in the world overtaking China. Contrast to this many countries is battling economic crisis. India has the third-largest armed force in the world and fifth-largest spender in defense, with around USD 55.923 billion annual spending.
India remains the largest arms importer in the world over the last 5 years (2011-15) accounting for 14.7% of total armed import. The allocation of the defense budget for 2016-17 is a massive USD 34.5 billion. Out of this, nearly USD 20 billion estimated budget is for import and approximately USD 10 billion will be spent on capital acquisition.
Opening up of the defense sector for private players has created a great opportunity for the global arm manufacturer. These manufacturers can do business not only in/for India, but also, can create arm manufacturing facility, to cater the world market. India has amended the defense procurement policy in 2016. A new category of capital procurement by IDM (Indigenously designed developed and manufactured) has been introduced to encourage indigenous design and manufacturing. The policy has clearly stated Buy and Make in India over Buy Global. The requirement for technology transfer is also explicitly defined. Provision for the global arm manufacturer to select Indian partner has been made.
Foreign direct investment, by automatic route, has been raised to 49% from 26% with the investment of more than 49% to be allowed after special clearance. The invest limit by the foreign portfolio investors has been set at 26% via automatic route.
The key sectors identified for manufacturing are aircraft and aero engines, submarines and naval fleets, arms & rifles and accessories.
Some of the Main Features of the Make In India Include:
Green channel policy promulgated as a step to promote ease of doing business Indian products will get higher preference over the global ones, therefore, imports are expected to fall considerably An offset clause where 30% of procurement will have to be from domestic providers in deals going over INR 3 billion The initial industrial licenses to be valid for a period of 3 years now up from the erstwhile 2 years Standard operating procedure for allotment and utilization of proof and field firing ranges by private defense industry R&D will witness the maximum governmental support, to make it more attractive and streamlined The Indian defense budget is expected to reach USD 66.5 billion, registering a CAGR of 8.78%. Out of which, around 75% of the budget is expected to go the Indian Army, due to the rising concern with the border dispute with China and Pakistan. Hence, this factor represents a very good opportunity for the players in the defense sector.