Defence Industry sector, which was hitherto reserved for the public sector, was opened up to 100% for Indian private sector participation in May, 2001. According to the government officials, since the opening up of Defence sector, a total of 584 Industrial Licenses have been issued to 358 companies for manufacturing of various defence items. The initial validity of the Industrial License granted under the Industries (Development & Regulation) Act has also been increased from 03 years to 15 years. Increase in validity of Industrial Licenses has provided sufficient time and space for companies to start operations and manufacture without hindrance.
In order to give a push to the domestic defence industry, the Government has taken several policy initiatives in the past few years and brought in reforms to encourage indigenous design, development, and manufacture of defence equipment in the country, thereby expanding the production of indigenous defence equipment to strengthen our armed forces.
These initiatives, inter-alia, include according to priority to the procurement of capital items from domestic sources under Defence Acquisition Procedure (DAP)-2020; Announcement of 18 major defence platforms for industry-led design & development in March 2022; Notification of three ‘Positive Indigenization Lists’ of total 310 items of Services and two ‘Positive Indigenization Lists’ of total 2958 items of Defence Public Sector Undertakings(DPSUs), for which there would be an embargo on the import beyond the timelines indicated against them.
Defence Ministry has reformed the Simplification of the Industrial licensing process with a longer validity period. Liberalization of Foreign Direct Investment(FDI) policy allowing 74% FDI under automatic route.
In terms of streamlining the defence policies and procurement, the Government has also simplified the Make Procedure.
In the area of defence research and development, defence Ministry has launched of Innovations for Defence Excellence (iDEX) scheme involving start-ups & Micro, Small, and Medium Enterprises (MSMEs). Under the iDEX, several projects are initiated to encourage start-ups in defence.
On the path towards indigenization, ministry reformed the Implementation of Public Procurement (Preference to Make in India) Order 2017 and launched of an indigenization portal namely SRIJAN to facilitate indigenisation by Indian Industry including MSMEs.
Government also reformulated the offset policy and gave new direction in Offset policy with thrust on attracting investment and Transfer of Technology for Defence manufacturing by assigning higher multipliers.
To attract investment and innovation in defence, ministry also establishment two Defence Industrial Corridors, one each in Uttar Pradesh and Tamil Nadu.
Opening up of Defence Research & Development (R&D) for industry, start-ups and academia with 25 per cent of defence R&D budget earmarked to promote the development of defence technology in the country.
Government has also increased the allocation of Defence Budget of military modernisation for procurement from domestic sources.