Govt Bets On MSMEs To Boost Local Aerospace, Defence Production

  • The number of MSMEs manufacturing defence products increased to 21% in Q2 FY2020
  • Govt is aiming to increase the annual export target of $5 Bn by 2025
  • Startups are also supporting defence production by financing MSMEs

By 2025, the government has set a target of becoming one of the top five global producers of the aerospace and defence manufacturing with an annual export target of $5 Bn. For the same, the centre had introduced a few schemes to promote local manufacturing of defence products and it seems that like that the efforts are working well for the government.

In response to a question in Rajya Sabha, MSME minister Nitin Gadkari said that till the second quarter of the financial year 2020, the number of domestic production partners of defence equipment increased 21% as compared to their number in entire FY19.

In FY19, there were 8,643 MSME vendors who were making defence equipment for the government. Notably, this number increased to 10,506 till Q2 FY20. While the number of Indian defence equipment manufacturers have now increased, it is yet smaller as compared to 15,089 vendors which the government had partnered with in FY17.

Gadkari also said that the MSME ministry is also running various programmes to promote the manufacturing of defence equipment locally. Some of these schemes are Technology Centre Systems Programme (TCSP), Micro and Small Enterprises–Cluster Development Programme (MSE-CDP), Procurement and Marketing Support Scheme, among others, he added.

Besides MSME ministry, the defence ministry has also launched certain programmes to support domestic defence equipment production across the country. Moreover, India’s Defence Production Policy of 2018 (DPrP-2018) is also a key part of the mission to boost exports and reduce the trade deficit.

For promoting innovation in the defence sector, the government is also looking to fund more than 250 startups over the next five years to achieve approximately 50 ‘tangible innovation’ for the Indian defence sector. To make this into a reality, the government is seeking approval for INR 500 Cr.

Besides manufacturing and innovation, Indian startups are also helping other MSMEs by providing them with financing opportunities. Some of the notable names are Credable, KredX, Cashflo, PYMNTS, Priority Vendor, Vayana Network, among others. These startups are operating in the space of supply chain financing which aims to ease the working capital requirements of MSMEs.

For instance, Credable offers two technology platforms working in parallel to support a business supply chain — the Credable platform for enterprise clients facilitates funding at the post-invoice stage and the Just-In-Time Financing Smart Contract platform for providing funding to suppliers prior to invoicing.

On the other hand, online invoice discounting platform KredX connects creditworthy SMEs looking to raise working capital, to individual investors looking for opportunities to earn above-average returns.

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