Deep-tech R&D for defence and aerospace gets a boost in Interim Budget

Union Finance Minister Nirmala Sitharaman has announced a new scheme in the interim budget for strengthening deep-tech technologies for defence purposes and expediting 'aatmanirbharta,' a long pending demand of the Indian defence and aerospace sector, which is being opened up to the private sector.

This announcement is in addition to the plans of setting up a corpus of rupees one lakh crore with a fifty-year interest-free loan. The corpus will provide long-term financing or refinancing with long tenors and low or nil interest rates. This will encourage the private sector to significantly scale up research and innovation in sunrise domains like defence and aerospace.

''We were hoping to have policies that will further fuel the growth in the past couple of years, promote competitiveness and enhance credit access for start-ups and MSMEs, as research, innovation and workforce development are required to compete globally'', says Pavan Ranga, Managing Director, Rangsons Aerospace.

''The government's announcement of providing long-term loans at negligible or zero interest emerges as a vital imperative and the development of cutting-edge technologies for defence demands substantial capital investment and endures a protracted gestation period'', says Rohit Chouhan, CEO, Nabhdrishti Aerospace.

India has been working on opening up the aerospace and defence sector for the private sector in a major way in the past two years with policy frameworks, banning the import of several components and military equipment to encourage indigenisation. However, one major stumbling block was the high level of R&D required and the long gestation period for bagging projects from the defence forces. India has so far indigenised 2,920 defence items like assemblies, sub-assemblies, raw materials, critical spares and components out of 4,666 listed items, Director (DIP), Department of Defence Production, Amit Satija, said this week. The Ministry of Defence has set a target of achieving defence exports worth ₹35,000 crore (US$ 4.27 billion) by 2024 and exports grew by 334% in the last five years.

Experts note that the scarcity of capital particularly hampers the prospects of startups and small enterprises, hindering their ability to compete with formidable global entities.  Furthermore, the initiative holds the potential to spur economic growth by creating employment opportunities within the defence sector. ''The proposition of extended, low-interest loans emerges as a strategic step towards bolstering the resilience and competitiveness of the defence industry, ensuring a secure and technologically advanced future," they say.