Starting-up for defence: Government plans to fund at least 250 defence start-ups

March 26, 2021 5:00 AM

By 2030, India’s aerospace and defence industry is estimated to reach a market valuation of around $70 billion (Maier+Vidorno).

At the recent Aero India (Yelahanka air base), the government signed Rs 48,000 crore contract to procure 83 Tejas aircraft from the HAL, and 34 aerospace and defence firms showed interest in investing in Karnataka to spur aviation business in the state.At the recent Aero India (Yelahanka air base), the government signed Rs 48,000 crore contract to procure 83 Tejas aircraft from the HAL, and 34 aerospace and defence firms showed interest in investing in Karnataka to spur aviation business in the state.

By Ajai Chowdhry

Under the ‘Make in India’ mission, defence has been identified as one of the most promising sectors, contributing towards external and internal peace and security as well as socio-economic development of the country. By 2030, India’s aerospace and defence industry is estimated to reach a market valuation of around $70 billion (Maier+Vidorno).

Against this backdrop, playing a pivotal role in achieving the vision of Atmanirbhar Bharat as well as Make in India is the start-up ecosystem. According to government data, India has around 194 start-ups in the defence-tech space that are leveraging new-age technologies to come up with solutions for empowering the nation’s defence and security.

Some such as CRON Systems, Asteria Aerospace, EyeROV and Optimized Electrotech are building solutions to address the key challenges in defence and security forces. They are using technologies such as drones, image analysis, robotics and artificial intelligence for bolstering India’s defence capabilities.

At the recent Aero India (Yelahanka air base), the government signed Rs 48,000 crore contract to procure 83 Tejas aircraft from the HAL, and 34 aerospace and defence firms showed interest in investing in Karnataka to spur aviation business in the state.

Looking at the potential the Indian start-ups possess and encouraging their efforts, the government has plans to fund at least 250 defence start-ups over the next five years.

Also, to reduce India’s reliance on defence imports, the defence ministry launched the Innovations for Defence Excellence (iDEX) initiative, pushing indigenous innovation and technology development in defence and aerospace. The ministry has earmarked Rs 500 crore to support MSMEs and start-ups through the iDEX. In the US, the DARPA created many technologies by offering grants, test beds and orders for the private sector. Under the iDEX, the government of India is offering grants and joint development with the defence forces.

It would be fair to mention that when the tech prowess of several start-ups adds to India’s military might, it will be a win-win not just for citizens and defence personnel, but also for entrepreneurs and government officials committed to building self-reliance. While these developments are taking place, the government is leaving no stone unturned. It is pursuing initiatives to achieve higher levels of indigenisation and self-reliance in the defence sector. The capital expenditure for defence saw an increase of nearly 19% this year compared to budget estimates of last year. In the wake of the pandemic-induced economic downturn and healthcare expenditure, emergency defence procurement stood at Rs 20,776 crore that India has had to make. It was made in the face of an increasingly belligerent and assertive China and in the absence of any increase in taxes or the imposition of a Covid-19 cess.

Further strengthening India’s defence efforts, the 15th Finance Commission made a host of recommendations in its report that covers years 2021-22 to 2025-26. The panel suggested for a non-lapsable modernisation fund of Rs 2.38 lakh crore for five-year period for defence and internal security. The government has given an in-principle nod to the setting up of the fund. The panel suggested the fund can have four sources of financing: transfers from the Consolidated Fund of India, disinvestment proceeds of defence public sector enterprises, proceeds from monetisation of surplus defence land, and funds from sale of defence land likely to be transferred to state governments and public projects in the future.

All in all, these initiatives and policy measures, if implemented effectively, will help India strengthen its indigenous defence industry. These would go a long way to enable India’s defence sector to contribute significantly towards the $5-trillion economy goal by 2025.

The author is founder, HCL, board member, IAN, and IC member, IAN Fund

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