Reforms boost small-business defence deals in India

The Indian Ministry of Defence (MoD) has procured defence equipment from micro, small, and medium-sized enterprises (MSMEs) worth INR305 billion (USD4.2 billion) in the past three fiscal years, new data revealed in Indian parliament has shown.

The figure is estimated by Janes to be equal to about 10% of total procurement funding during the period.

In a parliamentary reply given on 17 March by Minister of State for Defence Shripad Naik, he said the value of defence procurements from Indian MSMEs in 2018–19 was INR121.1 billion, but that it had declined a year later to INR90.9 billion.

In fiscal year (FY) 2020–21 – up to 11 March – the value of MSME procurement was nearly INR9.3 billion, he said.

According to Janes Defence Budgets, the total value of Indian defence procurement funding during the three years was about USD40 billion.

In his parliamentary reply, Naik gave no comparative statistics for MSME contracts, although he indicated that there has been a strong increase in recent years in response to a series of reforms introduced by the MoD.

These reforms, he said, include new measures contained in India’s offset guidelines to encourage foreign contractor engagement with MSMEs; government grants to support MSME defence research and development projects; easier access to details about opportunities to bid for supply contracts; preferential treatment in lower-value defence tenders; and schemes to provide loans and debt provision.