During the recently held ‘Bharat Shakti’ exercise at the Pokhran field firing range in Jaisalmer, Rajasthan, the country’s military might was on full display. From tanks to howitzers, artillery guns to light combat aircraft, the live tri-services fire and manoeuvre exercise had them all.

More than anything, Bharat Shakti showed India’s shifting focus on indigenous weapon systems and platforms, aiming to become the world’s largest defence manufacturing hub and raise defence exports from “$1.5 billion to $5 billion by 2024-25”. “From here, India will take rapid strides to be included among the largest defence manufacturing countries and our private sector and investors will play a big role in that,” PM Narendra Modi had said while addressing the inaugural session of Aero India 2023 in Bengaluru last year.

The government is largely dependent on imports due to the unavailability of critical defence technologies in the country. “However, considering the manufacturing capabilities of the Indian industry, its inclination towards technology and innovation, the growing defence Budget and defence acquisition policy favouring indigenisation, the defence manufacturing sector will flourish in the coming years,” says Abhyuday Jindal, MD of Jindal Stainless.

Defence has been a priority for Jindal Stainless for a long time. The stainless steel major recently signed an MoU with the MSME Tech Centre in Visakhapatnam for manufacturing value-added products for missile and satellite launch vehicle segments. “This MoU is a step towards our objective of reducing reliance on imports within the Indian ecosystem. Through this MoU, we aim to venture into defence engineering solutions with collective capabilities of JSL and SMEs to design, develop and deliver complex value-added products to Indian defence and aerospace industries,” says Jindal, without disclosing the order size or value of the deal as they “are project-based” and “considering the confidentiality of defence projects”.

Policy push

On March 4, defence minister Rajnath Singh launched a new scheme to push innovation in critical and strategic defence technologies, under which startups will be eligible for financial aid of up to Rs 25 crore for research, development and innovation in military technology. Called ADITI or Acing Development of Innovative Technologies with iDEX (Innovations For Defence Excellence), the scheme aims to develop about 30 deep-tech critical and strategic technologies in the proposed time frame. It also envisages creating a ‘technology watch tool’ to bridge the gap between the expectations and requirements of the modern armed forces and the capabilities of the defence innovation ecosystem.

“The scheme will nurture the innovation of youth, and help the country leap forward in the field of technology,” Singh had said while addressing a gathering at the DefConnect 2024 event in New Delhi. In the first edition of ADITI, 17 challenges—Indian Army (3), Indian Navy (5), Indian Air Force (5) and Defence Space Agency (4)—have been launched.

Such schemes are turning out to be a boon for private players, especially startups. In March, Big Bang Boom Solutions (BBBS), a defence startup, secured an order worth more than Rs200 crore from the Indian Air Force (IAF) and the Indian Army, for its cutting-edge anti-drone technology. As per reports, this order is the largest awarded by the Ministry of Defence (MoD) under the iDEX initiative, and one of the largest signed by the MoD with an Indian startup.

BBBS’s Vajra Sentinel System is a state-of-the-art solution designed to detect, track and neutralise drones at extraordinary ranges. It utilises passive radio frequency (RF) sensor technology to eliminate false alarms, and its sensor and jammer combination meets stringent military standard specifications for durability and reliability. It has a number of state-of-the-art tech improvements such as AESA radar and kamikaze drones which can be upgraded on demand by the user, as per the company.

Earlier last year, space data company Pixxel also won a multi-crore grant from iDEX under the MoD to manufacture miniaturised multi-payload satellites for the IAF. “The grant will equip Pixxel to develop a multi-payload modular satellite of up to 150 kg. The work on this has already begun and coordination with other subcontractors has also begun. After the successful completion of the first satellite, more orders for multiple satellite buses will be placed,” says Awais Ahmed, founder and CEO of Pixxel.

Pixxel has launched three satellites into space so far (one of them was India’s first-ever private commercial satellite) and is in the process of launching six more this year and another 18 by 2025. It has raised a total of $71 million in funding till date.

As per Ahmed, the recent amendments to the Foreign Direct Investment (FDI) policy in India’s space sector, allowing up to 100% FDI, marks a new era in the liberalisation of India’s space industry and will go a long way in fostering an ecosystem ripe for innovation, growth and global collaboration.

A shot in the arm

India was the fourth largest military spender in the world in 2022, with its defence spending increasing by around 6% as compared to 2021, a report by Swedish think tank Stockholm International Peace Research Institute (SIPRI) said in 2023. A year earlier, India was at the third position, only behind the US and China, with the country’s military spending amounting to $76.6 billion in 2021, as per SIPRI. In 2022, the amount was $81.4 billion.

Meanwhile, in her Interim Budget presented earlier this year, finance minister Nirmala Sitharaman raised the defence allocation to a record Rs 6.21 trillion, 4.72% more than the amount (Rs 5.94 trillion) announced in her previous Budget. Of this, Rs 1.72 trillion or 27.67% of the total defence budget was allocated for capital acquisition.

In the Budget for FY24, the capital outlay of modernisation and infrastructure development was Rs 1.63 trillion. Of this, a record 75% was earmarked for the domestic industry, up from 68% in FY23. This was announced by defence minister Rajnath Singh during the Bandhan ceremony of the 14th Aero India in Bengaluru on February 15, 2023.

The “unprecedented step” was apparently taken by the government to further strengthen the defence sector and minimise import dependency. “If you take one step, the government promises to take ten steps forward. You spoke of land to run on the path of development. We are providing you full sky. Earmarking three-fourth of the capital procurement budget for the local industry is a step in that direction,” Singh said.

Meanwhile, under the iDEX route, the Indian Army is pursuing as many as 55 projects worth Rs 400 crore, which encompass a total of 65 startups. Of this, four contracts worth Rs 70 crore have been concluded for procurement of equipment in limited quantity for field exploitation, Chief of Army Staff General Manoj Pande was quoted as saying at a recent event in Pune.

The defence sector, traditionally characterised by stringent regulations and a preference for established vendors, is indeed witnessing a gradual but significant opening up to domestic players, says Prateek Srivastava, founder of DroneAcharya Aerial Innovations, a startup that specialises in drone, space and defence technologies. “Private entities, equipped with innovative technologies and specialised skills, are increasingly being entrusted with critical defence contracts, reflecting a broader trend towards fostering self-reliance and bolstering indigenous defence capabilities,” he adds.

Earlier this year, DroneAcharya secured a defence tender worth Rs 1.18 million to conduct advanced drone pilot training and GIS (Geographic Information System) training for 20 officers from the Northern Command Pre-Induction Training School at Bhalra, Jammu and Kashmir. The 14-day on-site training programme will cover a spectrum of advanced modules, including night flying, challenging manoeuvres, emergency response, data processing and image interpretation.

Gunning for glory

In February, India joined an elite group of countries currently experimenting with high-altitude pseudo satellite vehicle, or HAPS, technology after the National Aerospace Laboratories (NAL) in Bengaluru successfully completed the first test of a solar-powered ‘pseudo satellite’. The new age unmanned aerial vehicle (UAV) can significantly increase India’s surveillance and monitoring capabilities in the border areas, as per reports.

HAPS can fly at altitudes of 18-20 km from the ground, almost double the heights attained by commercial airplanes, and, thanks to its ability to generate solar power, can remain in air for months, even years, offering it advantages of a satellite. But because it does not require a rocket to get into space, the cost of operating HAPS is several times lower than that of a satellite that is usually placed at least 200 km from the Earth, say reports.

The armed forces are betting big on HAPS technology. In March, the Indian Navy signed a contract under the iDEX initiative with NewSpace Research and Technologies (NRT) for design and development of HAPS. Incidentally, the Bengaluru-based firm had said in December last year that its HAPS successfully completed its first flight that lasted over 21 hours.

Recently, it was reported that NRT raised $52 million in a bridge round. The round comprises $33 million of equity from marquee investors and $19 million debt from SBI’s startup hub and SIDBI, as per reports.

Meanwhile, experts feel, while the government’s push for indigenous defence manufacturing in India is commendable, there are some areas where further action and reforms are necessary to boost the sector and address the challenges faced by domestic companies.

For example, there is ample scope to promote domestic manufacturing in defence, offers Abhyuday Jindal of Jindal Stainless. “It has been observed that many ongoing projects heavily rely on a single material type sourced from PSUs. Diversifying the sources of supply is imperative to ensure supply security. Moreover, involving material suppliers early on in product-specific development enhances the competitiveness of domestically approved materials,” he explains. “To address these challenges, the government could establish a central committee comprising all stakeholders to oversee the indigenisation programme. This committee would facilitate material evaluation by original equipment manufacturers (OEMs) and government test labs,” adds Jindal, who is establishing an integrated specialty steel facility in Hisar.

The facility will produce flat, forged and value-added products, addressing critical alloy needs and manufacturing complex components for the defence and aerospace sectors, says Jindal.

Today, access to grants and revenue and contract mechanisms for early-stage startups remains a big challenge, as compared to the US or Europe, especially for companies building indigenous capabilities, feels Ahmed of Pixxel. “These not only include strategic assets like satellites and drones built in India but also the sub-components that go into them. And larger scale programmes like iDEX Prime such as ADITI and others are coming up,” he adds.

Historically, India’s defence sector has heavily relied on imports, necessitating the establishment of a domestic parts ecosystem, says Jindal. “While this transition will take time, Indian manufacturers are exceptionally innovative, entrepreneurial, and skilled in engineering. With adequate government support, we are well-positioned to achieve this goal,” he adds.