Background
- India has long depended on defence imports, but recent years have seen growth in indigenous production and exports.
- Operation Sindoor (India’s cross-border military action) triggered renewed interest and confidence in India’s domestic defence capabilities.
Relevance : GS 3(Defence)
Key Trends & Developments
Stock Market Performance
- Defence stocks rose 21% in the week of Operation Sindoor (May 2024), compared to 3.1% gain in Nifty50 index.
- Following week: Defence stocks up 5.4%, while Nifty50 declined 0.5%.
- This signals a market perception shift in favour of homegrown defence capacity.
Record Defence Production
- FY24 (2023-24): ₹1.3 lakh crore — a 17% growth YoY.
- Double-digit growth since FY22; only contraction was in FY20 (-2.5%).
- FY25 (till Dec 2024): ₹90,000 crore, with full-year target at ₹1.6 lakh crore.
Soaring Defence Exports
- FY23 & FY24: Exports exceeded ₹20,000 crore — 2x of pre-FY20 figures.
- Export items: small arms, protective gear, artillery.
- FY25 target: ₹30,000 crore.Private Sector & MSME Involvement
Private Sector Growth
- Private players (e.g., Paras Defence, Bharat Forge) had ~20% share in production (FY17–FY24).
- FY25 share rises to ~24%.
- Private firms lead in defence exports, due to higher export authorisations.
MSMEs’ Role
- MSMEs supply crucial components to larger manufacturers.
- FY25 procurement from MSMEs: ₹13,000 crore, over 2x the target.
- FY18–FY20: only ₹3,000 crore worth orders.
- Government mandates ensure MSME inclusion in procurement.
Defence Budgetary Trends
- Despite production and export growth, defence spending’s share in total govt. expenditure is declining.
- However, India’s defence-to-GDP ratio is still higher than many emerging markets, indicating strategic priority.
