In May 2001, the Defence Industry sector, which was hitherto reserved for the public sector, was opened up to 100% for Indian private sector participation, with Foreign Direct Investment (FDI) up to 26% both subject to licensing. Further, Department of Industrial Policy & Promotion, Ministry of Commerce & Industry has notified revised FDI policy under which FDI is allowed under automatic route up to 49% and beyond 49% through Government route wherever it is likely to result in access to modern technology or for other reasons to be recorded. During the last three financial years (2016-17 to 2018-19), 149 contracts, have been signed with Indian vendors (91) and foreign vendors (58) for capital procurement of defence equipment for Armed Forces.
Government is taking measures for modernization of the Armed Forces, through procurement of new equipment and upgrading of existing equipment and systems. The modernization projects are being progressed as per the approved Capital Acquisition Plans and in terms of the extant Defence Procurement Procedure.
Since the launch of ‘Make in India’ in Sep. 2014, several measures have been taken by the Government to promote indigenous design, development and manufacture of defence & aerospace equipment in the country under ‘Make in India’ by harnessing the capabilities of the public and private sector.
Government has notified the Strategic Partnership (SP)’ Model which envisages establishment of long term Strategic Partnership with Indian entities through a transparent and comparative process, wherein they would tie up with global Original Equipment Manufacturers (OEMs) to seek technology transfers to set up domestic manufacturing infrastructure and supply chain.
The details of Budget Estimates (BE), Revised Estimates (RE) and Actual Expenditure (Actuals) on the modernization (Capital Acquisition) of Armed Forces, under Defence Services Estimates (DSE), for the last three years and the current year are as under:-
(Rs. in crore)
| Year | Budget Estimates(BE) | Revised Estimates(RE) | Expenditure(Actuals) |
| 2016-17 | 69,898.51 | 62,619.36 | 69,280.16 |
| 2017-18 | 69,473.41 | 68,965.24 | 72,732.28 |
| 2018-19 | 74,115.99 | 73,882.95 | 75,900.54 |
| 2019-20 | 81,008.57 | — | 19,560.27# |
