Why Are Defence Stocks Going Up?

India is working hard to make itself more self sufficient in defence. Instead of relying heavily on imports, the country is focusing on making its own military equipment. This move, called Atmanirbhar Bharat in defence aims to boost national security and turn India into a country that not only meets its own needs but also sells military gear to other countries.

Transformation in India's Defence Industry

In recent years, India's defence industry has grown substantially. In the last fiscal year (FY23), domestic defence production hit a record high of over ₹1 lakh crore (USD 12 billion) showing a growth of more than 12% compared to the previous year. Looking ahead projections suggest that India could be producing defence equipment worth about USD 35.9 billion (₹3 lakh crore) annually by 2027.

Despite being the world's largest arms importer, India is also making strides in defence exports. As per Stockholm International Peace Research Institute (SIPRI) in FY24, exports reached a record USD 2.5 billion (₹21,083 crore) marking a 32.5% growth from the previous year. Since 2016-17, defence exports have grown nearly 14 times over with an impressive annual growth rate of 45.6%. Indian government is actively partnering with both private and public sector defence firms to meet ambitious export goals.

Government Efforts Fueling Growth in India's Defence Sector

• Indian Ministry of Defence has set a goal to achieve a total business turnover of $26 billion in aerospace and defence manufacturing by 2025, with $5 billion specifically targeted for exports. They've introduced new policies like the Defence Production and Export Promotion Policy 2020 and the Defence Acquisition Procedure 2020 to support local manufacturers. These policies focus on buying from Indian companies, encouraging foreign investment and making it easier for private companies to participate in defence manufacturing.

• The government is focusing more on research and development in defense. They're putting more money into initiatives like Make-I, Technology Development Fund (TDF) and iDEX. These aim to help create new technologies and defense gear made in India. They want small and medium businesses and startups to get involved and bring new ideas.

• Indian Ministry of Defence (MoD) has created lists called positive indigenization lists. These lists require the Indian armed forces to buy specific items from domestic manufacturers, whether they are government owned or private companies. The goal is to reduce the need for imported defence equipment and help smaller Indian companies grow.

The Make Projects category within the Defence Procurement Procedure is a key part of India's Make in India initiative. It encourages Indian companies to design, develop and produce important defence equipment. This category includes different funding options and support to help companies at various stages of creating defence products.

Impact on Defence Sector Share

Defence Corridors and Path Forward

Indian government has set up special defence corridors in Uttar Pradesh and Tamil Nadu to boost local production of defence equipment. These areas have been equipped with unique facilities and incentives to attract companies in defence and aerospace manufacturing.

India is determined to become self reliant in defence. This involves several strategies like policy reforms, boosting local production, investing more in research and development and promoting exports. These efforts are expected to make India a strong player in global defence manufacturing.

The increase in defence exports and projected growth in local production are promising signs that India is moving in the right direction towards achieving self sufficiency in defence manufacturing.