{"id":17568,"date":"2024-12-02T07:15:21","date_gmt":"2024-12-02T07:15:21","guid":{"rendered":"https:\/\/niir.org\/blog\/?p=17568"},"modified":"2026-06-13T11:13:19","modified_gmt":"2026-06-13T05:43:19","slug":"opportunities-for-indian-msmes-in-defence-supply-chain","status":"publish","type":"post","link":"https:\/\/www.niir.org\/blog\/opportunities-for-indian-msmes-in-defence-supply-chain\/","title":{"rendered":"Opportunities for Indian MSMEs in Defence Supply Chain"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">The Defense sector in India is one of the most attractive sectors for investment<\/span> <span style=\"font-weight: 400;\">and growth potential and the Government too looks forward to self-reliance<\/span> <span style=\"font-weight: 400;\">under the Atmanirbhar Bharat program. This transition is mainly driven by<\/span> <span style=\"font-weight: 400;\">Micro, Small, and Medium Enterprises (MSMEs), that form an integral part of<\/span> <b>defence supply chain<\/b><span style=\"font-weight: 400;\">. Such enterprises engage in parts, subsystems or even<\/span> <span style=\"font-weight: 400;\">advanced technologies for supporting an indigenous defence system.<\/span><span style=\"font-weight: 400;\">\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The defence expenditure by India has increased over the years and there is a<\/span> <span style=\"font-weight: 400;\">clear focus on indigenous sourcing. This opens up huge prospects for the MSME<\/span> <span style=\"font-weight: 400;\">sector to develop in several directions. There is an enormous range from<\/span> <span style=\"font-weight: 400;\">implanting manufacturing capabilities for critical items such as sensors,<\/span> <span style=\"font-weight: 400;\">composites, avionics to providing IT enabled cyber security infrastructures.<\/span> <span style=\"font-weight: 400;\">MSMEs will be able to benefit on a huge scale due to these initiatives, such as<\/span> <span style=\"font-weight: 400;\">Defense India Startup Challenge (DISC), formation of <\/span><b>Defence Industrial<\/b> <b>Corridors <\/b><span style=\"font-weight: 400;\">and so on.<\/span><span style=\"font-weight: 400;\">\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">However, there are still associated challenges like the need for quality<\/span> <span style=\"font-weight: 400;\">adherence pressure, risks associated with procure defence insurance cover and<\/span><\/p>\n<p><span style=\"font-weight: 400;\">the level of technology sophistication required still exists. They would overcome<\/span> <span style=\"font-weight: 400;\">these challenges by investing in innovation, building skills, and OEMs<\/span> <span style=\"font-weight: 400;\">engagement. The integration of MSMEs with the larger defence economy<\/span> <span style=\"font-weight: 400;\">becomes critical to the execution of the &#8216;Make in India for Defence&#8217; vision.<\/span><span style=\"font-weight: 400;\">\u00a0<\/span><\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_88 counter-hierarchy ez-toc-counter ez-toc-white ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Topics Covered<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.niir.org\/blog\/opportunities-for-indian-msmes-in-defence-supply-chain\/#Defence_Manufacturing_Opportunities_for_MSMEs\" >Defence Manufacturing Opportunities for MSMEs\u00a0<\/a><ul class='ez-toc-list-level-2' ><li class='ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.niir.org\/blog\/opportunities-for-indian-msmes-in-defence-supply-chain\/#Defence_Industrial_Corridors_for_MSME_Growth\" >Defence Industrial Corridors for MSME Growth\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.niir.org\/blog\/opportunities-for-indian-msmes-in-defence-supply-chain\/#Collaborations_and_Innovations_The_Future_Pathway_for_MSMEs_in_Defence\" >Collaborations and Innovations: The Future Pathway for MSMEs in Defence\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.niir.org\/blog\/opportunities-for-indian-msmes-in-defence-supply-chain\/#Defence_Sector_Finesse_in_Overcoming_MSME_Challenges\" >Defence Sector Finesse in Overcoming MSME Challenges\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.niir.org\/blog\/opportunities-for-indian-msmes-in-defence-supply-chain\/#FAQs_Opportunities_for_MSMEs_in_Defence_Supply_Chain\" >FAQs: Opportunities for MSMEs in Defence Supply Chain\u00a0<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h1><span class=\"ez-toc-section\" id=\"Defence_Manufacturing_Opportunities_for_MSMEs\"><\/span><b>Defence Manufacturing Opportunities for MSMEs\u00a0<\/b><span class=\"ez-toc-section-end\"><\/span><\/h1>\n<p><span style=\"font-weight: 400;\">Indigenous manufacturing has provided the Indian MSMEs with new avenues in<\/span> <span style=\"font-weight: 400;\">the defence sector. As an increasing defence budget is being provided to<\/span> <span style=\"font-weight: 400;\">domestic industries, it is rightly placed that MSMEs should be promoting the<\/span> <span style=\"font-weight: 400;\">parts of high-end systems like drones, missiles, and electronic warfare solutions.<\/span><span style=\"font-weight: 400;\">\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Defence manufacturing oers several opportunities, such as production of<\/span> <span style=\"font-weight: 400;\">lightweight materials, AI-driven systems, and modular construction of naval<\/span> <span style=\"font-weight: 400;\">vessels. The policy reforms by the government have led to increased FDI cap in<\/span> <span style=\"font-weight: 400;\">the defence sector, allowing more collaboration between Indian MSMEs with<\/span> <span style=\"font-weight: 400;\">global players. This has enabled easier access to advanced technologies and<\/span> <span style=\"font-weight: 400;\">improved supply chain integration.<\/span><span style=\"font-weight: 400;\">\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">MSMEs play a vital role in the oset policy, which requires foreign defence firms<\/span> <span style=\"font-weight: 400;\">to procure a percentage of their equipment locally. The policy also allows<\/span> <span style=\"font-weight: 400;\">MSMEs to secure contacts with the global giants in defence, thereby eecting<\/span> <span style=\"font-weight: 400;\">knowledge and capacity-building.<\/span><span style=\"font-weight: 400;\">\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">To capture these opportunities, investments in R&amp;D, acquisition of quality<\/span> <span style=\"font-weight: 400;\">certifications such as AS9100, and skilled workforces are needed. Collaboration<\/span> <span style=\"font-weight: 400;\">with DPSUs and Startups would also drive the delivery of high-value products,<\/span> <span style=\"font-weight: 400;\">making MSMEs an integral part of India&#8217;s Defence manufacturing revolution.<\/span><span style=\"font-weight: 400;\">\u00a0<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Defence_Industrial_Corridors_for_MSME_Growth\"><\/span><b>Defence Industrial Corridors for MSME Growth\u00a0<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Increased use of Indian manufacturing resources: MSMEs have witnessed an<\/span> <span style=\"font-weight: 400;\">increase in the use of Indian manufacturing resources, especially in the defence<\/span> <span style=\"font-weight: 400;\">sector. As an increasing proportion of the defence budget is now being allocated<\/span> <span style=\"font-weight: 400;\">to local industries, it is expected that MSME sectors will be able to provide parts <\/span><span style=\"font-weight: 400;\">for sophisticated systems, including drones, missiles, and electronic warfare<\/span> <span style=\"font-weight: 400;\">systems.<\/span><span style=\"font-weight: 400;\">\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Some scope elements in defence manufacturing include the creation of<\/span> <span style=\"font-weight: 400;\">composite materials, AI systems, modular construction of ships, among others.<\/span> <span style=\"font-weight: 400;\">Government policy changes, such as raising the cap on Foreign Direct<\/span> <span style=\"font-weight: 400;\">Investment (FDI) in defence, have led to more synergies between large global<\/span> <span style=\"font-weight: 400;\">companies and Indian MSME firms. This has led to better technologies being<\/span> <span style=\"font-weight: 400;\">available and better supply chains being managed.<\/span><span style=\"font-weight: 400;\">\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Oset policy, which demands that defence equipment provided be bought by<\/span> <span style=\"font-weight: 400;\">foreign defence professionals locally for a certain percentage, has other facets<\/span> <span style=\"font-weight: 400;\">as well. The policy strengthens the ability of MSMEs to work with international<\/span> <span style=\"font-weight: 400;\">defense agencies as well as acquiring relevant skills and technologies.<\/span> <span style=\"font-weight: 400;\">Contracting defense global players oer more than just opportunities for<\/span> <span style=\"font-weight: 400;\">MSMEs.<\/span><span style=\"font-weight: 400;\">\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">To leverage these opportunities, MSMEs have to invest in R&amp;D, meet relevant<\/span> <span style=\"font-weight: 400;\">economic requirements like AS9100. Develop human resource trained for<\/span> <span style=\"font-weight: 400;\">such activities. Even support from DPSUs and collaborations with startups will<\/span> <span style=\"font-weight: 400;\">further be helpful to achieve the twin objectives of making high-value-added<\/span> <span style=\"font-weight: 400;\">products while considering MSME a key stakeholder in the market of defence<\/span> <span style=\"font-weight: 400;\">manufacturing in India.<\/span><span style=\"font-weight: 400;\">\u00a0<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Collaborations_and_Innovations_The_Future_Pathway_for_MSMEs_in_Defence\"><\/span><b>Collaborations and Innovations: The Future Pathway for MSMEs in Defence\u00a0<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Because of these eorts mentioned above, Indian MSMEs engagement in<\/span> <b>defence supply chain <\/b><span style=\"font-weight: 400;\">goes through a revolution. In this process, they establish<\/span> <span style=\"font-weight: 400;\">their relations with global OEMs and assimilate the modern technologies. M<\/span><span style=\"font-weight: 400;\">anufacturing processes that place them at world class standards. Through the<\/span> <span style=\"font-weight: 400;\">Defence Innovation Organisation (DIO) and its iDEX (Innovations for Defence<\/span> <span style=\"font-weight: 400;\">Excellence) programs. The MSMEs are encouraged to come forward with their<\/span> <span style=\"font-weight: 400;\">oerings.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Therefore, innovative technologies like UAV and AI-based security systems have<\/span> <span style=\"font-weight: 400;\">been developed. Further, applied research with organizations like DRDO allows<\/span> <span style=\"font-weight: 400;\">MSMEs to be part of the technology development processes that would be<\/span> <span style=\"font-weight: 400;\">eventually used in India. MSMEs are also venturing into the dual-use area that is<\/span> <span style=\"font-weight: 400;\">both military and civil in nature. Thus providing an assured revenue stream.<\/span><span style=\"font-weight: 400;\">\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Contributing to defense shows or attending global procurement places also<\/span> <span style=\"font-weight: 400;\">aords added advantage. Since it helps get the MSMEs better visibility for<\/span> <span style=\"font-weight: 400;\">securing contracts for long terms. To keep up with the above trend, MSMEs must<\/span> <span style=\"font-weight: 400;\">take up the case for automation; digitalisation through processes such as the<\/span> <span style=\"font-weight: 400;\">adoption of 3D printers and green manufacturing should be embraced. Such<\/span> <span style=\"font-weight: 400;\">developments remain relevant in the global <\/span><b>defence supply chain <\/b><span style=\"font-weight: 400;\">in a manner<\/span> <span style=\"font-weight: 400;\">that contributes to the Indianness vision.<\/span><span style=\"font-weight: 400;\">\u00a0<\/span><\/p>\n<p><b>Related Blog on: <\/b><a href=\"https:\/\/niir.org\/blog\/msme-and-its-importance-to-the-economy\/'\"><span style=\"font-weight: 400;\">MSME and Its Importance to the Economy<\/span><\/a><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Defence_Sector_Finesse_in_Overcoming_MSME_Challenges\"><\/span><b>Defence Sector Finesse in Overcoming MSME Challenges\u00a0<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Still, the opportunities, Indian MSMEs still face various challenges in the<\/span> <b>defence supply chain<\/b><span style=\"font-weight: 400;\">. More precisely, they are burdened with holistic<\/span> <span style=\"font-weight: 400;\">guidelines, present rigid cycles of procurement. The most importantly they have<\/span> <span style=\"font-weight: 400;\">less or no working capital to spur their growth. What also complicates things<\/span> <span style=\"font-weight: 400;\">further is the knowledge gap when it comes to utilization of government<\/span> <span style=\"font-weight: 400;\">programs. Understanding the technical qualifications and certifications<\/span> <span style=\"font-weight: 400;\">needed for defence tenders.<\/span><span style=\"font-weight: 400;\">\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The second issue the sector faces is technology adoption. Many MSMEs face<\/span> <span style=\"font-weight: 400;\">diculties not only in terms of finances but primarily incorporating advanced<\/span> <span style=\"font-weight: 400;\">production technologies like CNC machines or IoT-based systems. Additionally,<\/span> <span style=\"font-weight: 400;\">one of the major challenges MSMEs face while performing in the defence sector<\/span> <span style=\"font-weight: 400;\">is an inadequate supply of skilled labor. Since all the projects undertaken in the<\/span> <span style=\"font-weight: 400;\">sector are for specific targets with close compliance to international standards.<\/span><span style=\"font-weight: 400;\">\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">It is therefore recommended that MSMEs participate in the various workshops<\/span> <span style=\"font-weight: 400;\">and trainings conducted by the government for capacity building. Such funds as<\/span> <span style=\"font-weight: 400;\">the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to<\/span> <span style=\"font-weight: 400;\">help in this event of the capital problem. Apart from that, the resource sharing<\/span> <span style=\"font-weight: 400;\">opportunity is available with bigger players and alliances.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">It is also very important to implement policy changes, which encompass<\/span> <span style=\"font-weight: 400;\">simplification of the process involved in contract acquisition for defence by<\/span> <span style=\"font-weight: 400;\">MSMEs. Development of single windows for cases where MSMEs are looking<\/span> <span style=\"font-weight: 400;\">for contracts. MSMEs can and should rise up to the occasion, addressing the<\/span> <span style=\"font-weight: 400;\">challenges posed by the industry. Especially in terms of skill development,<\/span> <span style=\"font-weight: 400;\">digitization and defence value chain integration.<\/span><span style=\"font-weight: 400;\">\u00a0<\/span><\/p>\n<p><b>If you have any Questions:<\/b> <a href=\"http:\/\/niir.org\"><span style=\"font-weight: 400;\">You can Visit us<\/span><\/a><\/p>\n<h2><span class=\"ez-toc-section\" id=\"FAQs_Opportunities_for_MSMEs_in_Defence_Supply_Chain\"><\/span><b>FAQs: Opportunities for MSMEs in Defence Supply Chain\u00a0<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ol>\n<li><b> What role do MSMEs play in India&#8217;s defence supply chain?<\/b><b><\/b><\/li>\n<\/ol>\n<p><span style=\"font-weight: 400;\">MSMEs are essential elements of the domestic defence manufacturing system<\/span> <span style=\"font-weight: 400;\">as they oer vital parts, sub-systems and technology.<\/span><span style=\"font-weight: 400;\">\u00a0<\/span><\/p>\n<ol start=\"2\">\n<li><b> What potential does Defence Industrial Corridor hold for MSMEs?<\/b><b><\/b><\/li>\n<\/ol>\n<p><span style=\"font-weight: 400;\">The <\/span><b>Defence Industrial Corridors <\/b><span style=\"font-weight: 400;\">oer infrastructure, finance, and partnership<\/span> <span style=\"font-weight: 400;\">opportunities to expand MSMEs to be a part of the global chain.<\/span><span style=\"font-weight: 400;\">\u00a0<\/span><\/p>\n<ol start=\"3\">\n<li><b> What are the problems of MSMEs in defence sector?<\/b><b><\/b><\/li>\n<\/ol>\n<p><span style=\"font-weight: 400;\">The problems include maintaining quality leadership, limited access to<\/span> <span style=\"font-weight: 400;\">technology, lengthy procurement cycle, and not having adequate working<\/span> <span style=\"font-weight: 400;\">capital.<\/span><span style=\"font-weight: 400;\">\u00a0<\/span><\/p>\n<ol start=\"4\">\n<li><b> How does oset policy benefit MSMEs?<\/b><b><\/b><\/li>\n<\/ol>\n<p><span style=\"font-weight: 400;\">Perhaps the most praiseworthy component of the oset policy is that it forces<\/span> <span style=\"font-weight: 400;\">foreign contractors to source. Some of their components locally within India,<\/span> <span style=\"font-weight: 400;\">thereby tapping the MSMEs for support in the international market.<\/span><span style=\"font-weight: 400;\">\u00a0<\/span><\/p>\n<ol start=\"5\">\n<li><b> What measures should MSMEs take to strengthen their capabilities in<\/b> <b>defense manufacturing?<\/b><b><\/b><\/li>\n<\/ol>\n<p><span style=\"font-weight: 400;\">MSMEs can channel their energies toward R&amp;D, quality certification, modern<\/span> <span style=\"font-weight: 400;\">manufacturing processes. Personnel development so as to meet the<\/span> <span style=\"font-weight: 400;\">International standards.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"The Defense sector in India is one of the most attractive sectors for investment and growth potential and&hellip;","protected":false},"author":22,"featured_media":17569,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"iawp_total_views":100,"csco_display_header_overlay":false,"csco_singular_sidebar":"","csco_page_header_type":"","footnotes":""},"categories":[39],"tags":[14945,15847,15848],"industry":[],"class_list":["post-17568","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business-opportunities","tag-business-opportunities","tag-defence-supply-chain","tag-opportunities-for-msme","cs-entry"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.6 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Opportunities for Indian MSMEs in Defence Supply Chain<\/title>\n<meta name=\"description\" content=\"India&#039;s defense sector is booming, and MSMEs are at the forefront. 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