Driving Atmanirbhar Bharat: The Role of Technology, MSMEs, and Private Innovation in Transforming Defence Manufacturing
By Mr. Sahil Luthra
India is progressively enhancing its defence manufacturing capabilities, focusing on reducing imports and increasing exports. MSMEs are playing an important role in this process, contributing to the development of locally produced defence solutions.
The private sector has also seen notable growth, with its share in defence production reaching 22% in FY24—the highest in almost a decade. According to the Observer Research Foundation, India aims to achieve $25 billion in defence production and $5 billion in exports by 2025. A significant part of this strategy involves empowering small businesses and supporting them in creating modern, innovative defence solutions.
MSME Advantage in Defence
Small businesses bring flexibility, fresh ideas, and problem-solving capabilities to the table. Today, there are around 8,000 MSMEs actively involved in India’s defence sector, and the aim is to double this number. The government has allocated ₹1,500 crore specifically for start-ups and MSMEs from its domestic procurement budget, underscoring their importance in the bigger picture.
However, this goes beyond financial support. MSMEs are being integrated into larger defence projects through outreach programs, creating opportunities for collaboration and growth. But challenges remain—delayed payments and limited access to credit are hurdles these businesses must overcome to thrive.
Innovation and Technology
Technology is changing the face of defence manufacturing, and MSMEs are at the forefront of this shift. Initiatives like Innovation for Defence Excellence (iDEX) and the Technical Development Fund are encouraging small players to think creatively. From AI-powered systems to 3D-printed components, MSMEs are helping redefine what’s possible in defence production.
The adoption of digital simulations and advanced manufacturing techniques has also allowed these businesses to produce equipment that meets global standards. With the right mix of innovation and government support, MSMEs are becoming an indispensable part of India’s defence ecosystem.
Big Opportunities Ahead
India’s defence industry is preparing for substantial growth. According to a Nomura report, there’s an estimated $138 billion opportunity in defence contracts between FY24 and FY32. Sectors like aerospace and naval shipbuilding stand out as growth areas, with investments expected to reach $50 billion and $38 billion, respectively.
Exports are also on the rise, reaching a record $29 billion in FY24. This demonstrates India’s potential not just as a self-reliant nation but as a global exporter of high-quality defence equipment.
Defence Corridors, The New Growth Engines
The two defence corridors in Uttar Pradesh and Tamil Nadu are turning into hubs of innovation and manufacturing. With $4.5 billion already invested, these corridors are fostering partnerships between MSMEs and larger defence players, creating an ecosystem where new ideas thrive.
For example, the Tamil Nadu corridor is focused on high-tech components, while the Uttar Pradesh corridor is producing critical defence systems. These regional hubs are not just building defence capabilities but also creating jobs and boosting the local economy.
Government Policies
Government policies are providing the much-needed push for local manufacturing. The Defence Acquisition Procedure (DAP) 2020 gives priority to Indian companies, particularly under the Make in India categories. Simplified licensing and relaxed FDI norms have further encouraged private players and MSMEs to venture into defence manufacturing.
Challenges and Solutions
While the developments are encouraging, there’s room for improvement. MSMEs still face issues like inconsistent payment schedules and high costs of adopting new technologies. Addressing these bottlenecks requires targeted efforts, such as dedicated funds for MSMEs and simplified regulations to ease their operations.
Capacity-building programs, combined with better infrastructure, can help small businesses scale up and compete globally.
India’s vision of Atmanirbhar Bharat in defence is not just a government initiative—it is a collective effort involving businesses, innovators, and policymakers. By addressing the challenges faced by MSMEs and supporting their capabilities, India is moving closer to becoming a global leader in defence manufacturing.
This journey is about more than just numbers; it is about creating a system where every player, big or small, contributes to the nation’s security and self-reliance. As MSMEs continue to develop and integrate into defence supply chains, their role will remain crucial in turning India’s vision of self-reliance into reality.
(The author is Mr. Sahil Luthra, Founder and MD of Vijayan Trishul Defence Solutions Pvt. Ltd., and the views expressed in this article are his own)
