The largest state of India, UP is set to become a major manufacturing destination in the country. Political stability, proximity to the national capital region, sustained investments towards infrastructure, lowering of crime rates, and a large concentration of SMBs make UP a favorable destination to run and start a manufacturing business.
Amongst various sectors, the state is also centerstage to India’s ambition of becoming a global defense powerhouse. India already is home to one of the largest militaries in the world and holds a massive defense budget, after China and USA. In FY 24, the total defense budget in India amounted to USD 81.24 billion, climbing up from the budget in FY 23, when it was pegged at USD 77 billion. It is also among the biggest defense importers across the globe. As per the SIPRI report, India accounts for 11% of the total arms import, surpassing KSA (9.6%) and Qatar (6.4%).
However, GOI is committed to making India self-reliant in defense production and systematically reducing reliance on foreign imports. India is also eyeing a lucrative share of the global defense exports market. Defense export from India reached USD 1.7 billion in FY 22, growing at a CAGR of over 49%.
Hundreds of items have been put on the negative list, while a separate budget has been identified for locally manufactured ammunition and defense equipment. The FDI limit has also risen to 74% in the defense sector from 49% earlier.
As a part of India’s plan to become a defense destination, the country has announced a couple of defense corridors, one in the state of UP as well as Tamil Nadu.
The UP-defense corridor is six nodes extensive defense cluster, which is going full swing. The corridor comprises Agra, Aligarh, Kanpur, Lucknow, Jhansi, and Chitrakoot, thereby covering west and central UP alongside the Bundelkhand region. Already land has been mapped and work is going on to develop the common facilities & infrastructure. The government will provide/ assist with power & water supplies, plug-in-play manufacturing units, housing, and infrastructure, etc. Likewise, it will also support creating R&D capabilities, testing ranges, marketing & promotion, etc.
The UP-defense corridor will focus on defense production, arms & ammunition, explosives, safety gears, sensors & radars, metal & alloys, etc.
There are multiple advantages to setting up the Defense manufacturing business in the UP-defense corridor, as underlined below
Already in the past 2 years, investments have picked up in the corridor. Recently, Bangalore-based aerospace enterprise Genser has announced to invest INR 3000 crores (USD 420 million) to develop a full-functional airplane manufacturing set-up. The newly built unit will be located at Kanpur and develop 1200 units over the next 20 years. While 50% of the production will be supplied to the Indian defense forces, the remaining will be exported.
India’s leading business conglomerate, Adani Groups under the flagship of Adani Defense is investing INR 1500 crores (USD 210 million) to develop a defense manufacturing unit. India and Russia will be working in a JV to manufacture Brahmos missiles to be used by the Indian defense establishments.
There are numerous incentives provided by the government to enterprises planning to start their operations at the UP-defense corridor.
The UP-defense corridor is set to become a thriving ground for OEMs, and manufacturers, alongside start-ups, ancillary businesses, and other related mid-scale enterprises. As discussed, already international and indigenous defense & aerospace enterprises, PSUs, and SMBs are coming to the region. In the times more enterprises are expected to join the bandwagon, aligned with the GOI’s objective to transform India into a global defense powerhouse.
However, starting a business set-up in India also requires extensive data, information, and actionable insights. In an absence of powerful access to data, an enterprise might make a sub optimal business decision.
Hence, it is advisable to seek assistance from a seasoned advisor and consultancy that can help new businesses with the required data and on-ground support. A consultancy can help with the following set of services underlined below
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