(Commonwealth_India) The Prime Minister has set a bold target for India’s defense sector, aiming to increase domestic defense production to approximately $35 billion by the end of the decade. This represents a significant jump from the current production level of about $20 billion. The ambition is to gradually reduce dependency on foreign defense imports and bolster India’s self-reliance in the sector, aligning with the broader goal of enhancing national security capabilities.
For the fiscal year ending March 2025, the government has allocated a defense modernization budget of around $20 billion, which marks a slight increase from last year’s allocation of $19 billion. Notably, 75% of this budget is reserved for supporting the domestic defense industry, highlighting the government’s strategic focus on fostering local manufacturing and innovation in defense technologies. This move is in line with the ‘Atmanirbhar Bharat’ (Self-Reliant India) initiative, which seeks to enhance indigenous production, reduce dependence on imports, and position India as a global leader in defense manufacturing.
However, despite these progressive steps, the defense sector remains heavily dominated by state-owned enterprises. The government continues to hold a controlling stake of approximately 80% in some of the largest defense companies. This dominance of state-run entities has resulted in limited private sector participation in the defense production landscape, raising concerns about the openness of the market.
R. Balasubramanian, a prominent defense industry expert, commented on the situation, stating that while there are sectors within the Indian economy that have seen liberalization and increased private participation, the defense industry is still relatively closed off. Unlike industries such as technology and pharmaceuticals, which have experienced more openness and competition, the defense space remains largely protected, with state-owned companies continuing to hold a substantial share.
The government’s control over major defense companies, such as Hindustan Aeronautics Limited (HAL), Bharat Dynamics Limited (BDL), and Bharat Heavy Electricals Limited (BHEL), has raised questions about the pace of reform within this vital sector. While these companies are integral to the country’s defense apparatus, their state ownership has sometimes led to inefficiencies, slow innovation, and reduced competition. As the government seeks to ramp up defense production, balancing the role of public and private players will be crucial to the success of its ambitious targets.
To address these challenges, the government has started making incremental changes. These include introducing policies to encourage private sector participation, facilitating joint ventures between foreign and Indian companies, and allowing greater market access for private players in defense manufacturing. While the defense sector is not yet fully open, these steps are expected to gradually introduce more competition and innovation, fostering a more dynamic and competitive defense industry.
Looking ahead, the government’s focus on defense modernization and self-reliance will likely shape the future trajectory of India’s defense production. Achieving the $35 billion target by the end of the decade will require continued investment in indigenous research and development, infrastructure, and skill-building. However, the true test will be whether the sector can successfully transition to a more open, competitive environment that nurtures both public and private sector collaboration, ensuring India’s defense capabilities are both cutting-edge and sustainable in the long term.
