The Rising Role of MSMEs in Defence Manufacturing and Exports
In April this year, Defence Minister Rajnath Singh tweeted that Indian defence exports have scaled to unprecedented heights and crossed the Rs 21,000 crore mark in the financial year 2023-24, for the first time in the history of Independent India; which is a spectacular growth of 32.5% over the previous fiscal. On an earlier occasion, speaking about the important role being played by MSMEs to realize the vision of ‘Aatmanirbhar Bharat’, the minister highlighted that while major industries play a big role in national security and economic development by manufacturing tanks, submarines, aircraft, and helicopters, hidden behind these big platforms are small and medium industries.
More than 12,000 MSMEs are in the defence industry and they are expected to play a greater role in meeting domestic and international requirements in the years to come. As India strives towards self-reliance in defence manufacturing, these enterprises are becoming the backbone of innovation, cost-efficiency, and export growth.
MSMEs are often characterised by their agility, innovation, and ability to quickly adapt to changing technological landscapes. These qualities make them invaluable in the defence sector, where rapid advancements and evolving security needs demand quick and efficient responses. MSMEs are at the forefront of technological innovation. They develop and deploy cutting-edge solutions that are essential for modern defence applications. Their contributions range from advanced electronics and precision engineering to software development and specialized materials, all of which enhance the overall capabilities of India’s defence forces.
With their flexible cost structures, MSMEs provide high-quality products at competitive prices. This cost-effectiveness is critical in a sector where budget constraints are a constant challenge. MSMEs’ ability to deliver superior value without compromising on quality helps optimise defence spending, allowing for better allocation of resources across the sector.
MSMEs contribute to a wide array of activities within the defence sector. They manufacture critical components, provide maintenance and support services, and supply subsystems that are crucial for the functionality of larger defence platforms. This diversity strengthens the supply chain, ensuring resilience and reducing dependency on a limited number of suppliers.
Reducing Foreign Dependency
Recognising the importance of MSMEs, the Indian government has launched several initiatives to foster their growth and integration into the defence sector. Initiatives like Make in India and Atmanirbhar Bharat aim to promote indigenous manufacturing and reduce dependency on foreign imports. Policies under these programs provide financial incentives, simplify regulatory processes, and encourage collaboration between MSMEs and larger defence companies, fostering a more robust and self-reliant defence industry.
Through Innovations for Defence Excellence (iDEX), the Defence Innovation Organisation (DIO) supports MSMEs and startups by providing a platform to showcase their technologies. This initiative helps MSMEs secure funding for development and commercialisation, driving a culture of innovation and technological advancement in defence. The Defence Acquisition Procedure (DAP) 2020 includes provisions that ease procurement for MSMEs. These measures ensure that MSMEs can participate more readily in defence contracts, enhancing their role in the national defence supply chain.
MSMEs are crucial to India’s strategy to increase defence exports, a key objective of the national defence policy. Many MSMEs produce defence components and systems that meet international standards. These high-quality, competitively priced products are well-positioned to capture a share of the global defence market. MSMEs are increasingly forming collaborations and joint ventures with international defence firms. These partnerships facilitate technology transfer, improve manufacturing practices, and open up new markets for Indian MSMEs, enhancing their global competitiveness. Initiatives like the Defence Export Promotion Scheme (DEPS) and the establishment of Defence Export Promotion Offices (DEPOs) abroad are crucial in promoting MSMEs in international markets. These efforts help MSMEs navigate the complexities of foreign trade, ensuring they can effectively compete on the global stage.
Strengthening the Support System
Despite their significant contributions, MSMEs face challenges such as limited access to advanced technology, financial constraints, and regulatory hurdles. Addressing these issues is essential for maximizing their potential. Improving access to credit and financial support can empower MSMEs to invest in research and development, expand their operations, and enhance their technological capabilities. Supporting MSMEs in adopting advanced technologies through subsidies, grants, and partnerships with research institutions can drive further innovation and efficiency. Simplifying regulatory procedures and reducing compliance burdens can allow MSMEs to focus more on production and innovation, thereby enhancing their contributions to the defence sector. Investing in targeted skill development programs ensures a steady supply of skilled manpower, boosting the productivity and competitiveness of MSMEs in the defence industry.
MSMEs are poised to play an increasingly crucial role in India’s defence sector and in boosting defence exports. Their innovation, cost-effectiveness, and diversified capabilities are essential for achieving the vision of a self-reliant and globally competitive defence industry. By addressing their challenges and leveraging their strengths, India can harness the full potential of MSMEs, ensuring a robust, resilient, and advanced defence manufacturing ecosystem. The future of India’s defence sector lies in the synergy between policy support, technological innovation, and the entrepreneurial spirit of its MSMEs.
