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Credit rating agency ICRA in its latest report has said that business opportunities worth Rs 2.75 lakh crore are expected to open up for Indian Defence entities in the next two years, 22% of which (Rs 60,000 crore) would be available for the private sector entities. This is in the backdrop of the sustained increase in annual budgetary allocations, coupled with the government’s focus on reducing import dependence and the ambitious target of Rs. 1.75 lakh crore annual Defence production by FY2025. 

ICRA expects the share of private entities in the total production to gradually improve to 22% and their production to grow at a CAGR of around 20% in the next three years to reach Rs 34,000 crore by FY2026. It stated that the government has taken numerous measures in the past few years to enhance private sector participation, including tenders exclusively for the private sector, discontinuation of excise/customs duty exemptions, which were hitherto enjoyed by the Defence Public Sector Undertakings (DPSUs).

According to the report, sustaining the commitment towards augmentation in the area of modernisation and infrastructure development of the Defence services, the Government of India, in the Union Budget 2023-2024, continued the increasing trend of capital outlay allocation with a YoY increase of 6.6% in the FY2023-24 BE to Rs. 1.62 lakh crore, resulting in a CAGR of 10.1% during FY2019-FY2024. It noted that numerous policy initiatives, with Atmanirbhar Bharat at its core, have helped enhance domestic design capabilities, encouraged investments and enabled the sector to grow tremendously in the past few years, thus boosting the long-term prospects of the Indian Defence manufacturing sector.