On the back of robust government reforms and increasing private sector participation, India's defense sector production is set to grow at a compound annual growth rate (CAGR) of around 20 per cent during FY24-FY29, said a report released on Monday.
According to the report from CareEdge Ratings, Indian defense sector companies will further enhance the country's defense capabilities, reduce import dependence, and elevate its global stature.
The collaboration between government and private sector entities in India’s defence sector has driven advancements in arms and ammunition, aerospace, electronics, and naval technologies.
Private sector entities, both domestic and multinational, are expected to play a pivotal role in advancing defence modernisation, leveraging their engineering and technological expertise, the report observed.
The policies, including the liberalized FDI norms and 'Make in India', have supported this collaboration by increasing domestic manufacturing capabilities, attracting international investments in defense innovation, and driving notable growth in exports of military equipment, the report pointed out.
India's defence budget has consistently ranged between 1.90 to 2.8 per cent of its gross domestic product (GDP) in recent years.
For the fiscal year 2024-25, a tremendous amount of Rs 6.22 lakh crore is being allocated for the defense sector.
India has also set an ambitious annual defence production outlay of Rs 1.75 lakh crore for FY25, which is expected to grow at a CAGR of around 20 per cent to Rs 3 lakh crore (as per Ministry of Defence) by FY29, underscoring its commitment to becoming a self-reliant defence powerhouse, the report noted.
Historically, India has been a net importer of defence equipment, mainly relying on overseas suppliers for its critical military requirements.
However, significant efforts towards self-reliant defence manufacturing and technology development, including policy reforms of the nature of the 'Make in India' programme, are gradually bringing a change.
The Indian defence exports have gained momentum in the last six years through FY24 and have registered a healthy CAGR of about 28 per cent.
CareEdge Ratings expects India's defense exports to rise in line with the government's spending on the sector at an approximate rate of about 19 percent over the next 5 years, that is FY24 to FY29 on a more extensive base.
India's defense exports include aircraft, naval systems, missile technology, and military hardware.
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