Budget 2023: What to expect from the defense manufacturing industry

New Delhi:

The Union Budget 2023-24 will be presented by Finance Minister Nirmala Sitharaman on 1 February. The defense manufacturing sector is hoping that the schemes and policy decisions announced by the minister will boost the production of the industry.

In the last few years, the central government has reduced imports while promoting manufacturing in the defense sector. India’s defense exports are set to increase eight times from Rs 1,521 crore in 2016-17 to Rs 12,815 crore in 2021-22. capital expenditure on imports The percentage of conscription by the armed forces decreased from 41.89% in 2019-20 to 36% in 2020-21.

The government had allocated Rs 5.25 lakh crore for this sector in the Union Budget 2022-23. Domestic capital procurement accounts for 64% of the Defense Services Capital Acquisition Budget 2021-22. This was increased to 68% in the next financial year.

According to industry insiders, the budget should encourage procurement from start-ups in the defense sector who have innovative products. He said that tax exemption and GST exemption would encourage the industry to invest more in innovation in the defense manufacturing sector. The defense manufacturing sector is hopeful that the ramping up of procurement will boost the growth of the industry in India.

In December last year, the Defense Ministry had approved the purchase of weapons worth Rs 84,328 crore to boost the combat capabilities of the defense forces. These included six capital acquisition approvals for the Indian Army, 10 for the Indian Navy, six for the Indian Air Force and two for the Indian Coast Guard.

The government has also set up two Defense Industrial Corridors (DICs), one in Uttar Pradesh and one in Tamil Nadu. These have been set up to attract investments of up to Rs 10,000 crore in each corridor. Emphasis has also been laid on promotion of exports and liberalization of foreign investment. So far four positive indigenization lists have been issued by the Ministry of Defence. The list includes various defense equipment that will be manufactured domestically.

The government has also launched Production Linked Incentive (PLI) schemes in 14 sectors with a total investment of Rs 1.97 lakh crore. The objective of the scheme is to promote domestic manufacturing, investment and exports. In September 2021, the scheme was extended to manufacture drones and drone components.