Aerospace and defense Market in India 2024-2028

Aerospace and defense Market in India 2024-2028

The Aerospace and Defense market in India offers appealing and significant opportunities for both Indian and foreign companies throughout the supply chain. India has the world's third-largest armed forces, and the defense budget accounts for approximately 1.97% of its GDP.

India is one of the frontrunners in the import of conventional defense equipment, with around 13.18 % of the total budget of FY 2024 being allocated to the Ministry of Defense to achieve self-sufficiency in defense production.

The ordnance factories and defense public sector undertakings (DPSUs) have been continuously modernizing, upgrading, and expanding their product ranges.

Market overview:

The MoD announced an investment worth INR 5,935.37 Bn for defense spending for FY 2024 , up from INR 5,251.66 Bn in FY 2023, expanding at a compound annual growth rate of 8.33% from FY 2023 to FY 2024.

This includes expenditures for armed forces and civilian salaries, pensions, armed forces’ modernization, production establishments, maintenance, and its research and development organizations.

The Indian government has been boosting self-reliance in defense manufacturing in the country by encouraging domestic designing, development, and manufacturing of defense equipment.

In 2022, two defense corridors were set up in Tamil Nadu and Uttar Pradesh to support Foreign Original Equipment Manufacturers (FOEMs). In FY 2023, India’s defense production stood at Rs. 178.85 Bn, of which ~60% was by PSUs.

Market driver:

Companies in aerospace and defense often face financial and operational challenges owing to the tight delivery deadlines for new aircraft, as well as the demand for the upgradation of existing models. With simplified offset norms, changes in defense procurement procedures (DPP), and easing of FDI restrictions, private sector companies are eyeing the aerospace and defense sector in the country.

Players from various industries such as Reliance Industries and Adani Group are investing in the various possibilities stemming from the push for indigenization.

Furthermore, as globalization and international competition grow, the demand to manufacture indigenously is likely to increase.

Key trend:

As part of the ‘Make In India’ push, indigenous production in the defense sector is anticipated to increase and play a more crucial role in the coming years.

The government has also been promoting domestic manufacturing of defense equipment and reducing reliance on foreign players, setting up defense corridors, offering incentives to local players, and launching the Innovations for defense Excellence (iDEX) scheme by involving Start-ups and Micro, Small, and Medium Enterprises (MSMEs)’). The reduction of expenditure on foreign procurement from 46% in 2018 – 2019 to 36% in 2021 – 2022 is reflective of the trend of the government’s increased focus on the procurement of defense products from domestic resources.