The new scheme, with a Rs. One lakh crore corpus will offer long-term, zero-interest finance to spur defence innovations.
Finance Minister Nirmala Sitharaman unveiled a new scheme to establish a large fund to enhance research and development (R&D) and foster innovation within the private defence sector. The new initiative seeks to promote the advancement of deep tech within the defence sector, with a large corpus of Rs 1 lakh crore funds dedicated to long-term interest-free financing. This program aims to encourage startups and industries opportunities to utilise testing and validation facilities, receive guidance from the armed forces, and secure long-term interest-free loans for the development of weapon systems- – a move that was welcomed by the Indian industry.
“Innovation is the foundation of development,” Sitharaman said, presenting the interim budget on 1st February, ahead of the national elections. “For our tech-savvy youth, this will be a golden era. A corpus of Rs100,000 crore will be established with a 50-year interest-free loan provided. The corpus will provide long-term financing or refinancing with long tenors. This will encourage the private sector to scale up research and innovation significantly in sunrise domains.”
“The Interim Budget recognises Innovation as a key driver for growth through the introduction of a significant corpus of Rs 1 lakh crore for offering a fifty-year interest-free loan to scale up R&D in sunrise domains. The fiscal performance bodes well for the country’s macroeconomic stability and investor confidence,” said Anish Shah, President of FICCI.
The move to offer interest-free loans for 50 years to emerging tech entrepreneurs is a forward-looking measure, indicating the government’s commitment towards nurturing a robust technology ecosystem. Establishing this new fund is a pivotal and strategic move to strengthen private sector research and development (R&D). Creating advanced technologies for defence requires significant initial investment and involves an extended development period. Consequently, providing long-term, low-interest loans is expected to enhance the resilience and competitiveness of local defence startups and businesses. Industry representatives expressed these sentiments in response to the mega announcement.
In her budget speech, Sitharaman asserted that opportunities for India at the global level are expanding, adding that “a new scheme will be launched for strengthening deep tech technologies for defence purposes and expediting Atmanirbhartha (self-reliance).”
Last year, the government announced its first national policy for deep tech startups. This policy outlined nine specific areas where the government would intervene to support ventures focused on commercialising products rooted in rigorous scientific research and engineering, aiming to cultivate and strengthen the overall deep tech ecosystem in the country.
The Significance of Deep Tech in Defence and National Security
Deep tech entails incorporating advanced technologies like artificial intelligence, machine learning, and robotics across diverse sectors, including defence. In the last decade, the adoption of deep tech has brought about a revolutionary shift in military operations. These technologies have notably elevated the capabilities of armed forces in countries such as the US, Israel, China, and Germany, empowering them to operate with increased efficiency, precision, and effectiveness.
Nations like the US extensively utilise autonomous systems, including unmanned aerial vehicles and unmanned ground vehicles, for surveillance, reconnaissance, and combat missions. These systems can traverse challenging terrains and collect real-time intelligence with minimal human involvement, consequently mitigating the risk to human lives.
The significance of deep tech is pivotal in the realm of defence cybersecurity. With the escalating dependence of defence forces on digital systems, the vulnerability to cyber-attacks rises accordingly. Deep-tech solutions, encompassing sophisticated encryption algorithms, machine learning-powered anomaly detection systems, and secure communication networks, have been created to safeguard military networks against cyber threats. These technologies facilitate early detection and response to potential attacks.
AI algorithms can analyse extensive datasets, identifying patterns that can be leveraged for strategic advantages. Deep tech advancements have facilitated the creation of sophisticated sensors and surveillance systems, delivering real-time intelligence. This capability empowers commanders to make informed decisions quickly.
Growing Significance of Deep Tech Startups in India
In India, research and development of future weapon systems have remained mainly under government-owned entities like DRDO as they require long-term capital infusion and do not guarantee success, making it challenging for private companies to generate funds. However, with the recent dual announcements of long-term interest-free loans for innovation and deep tech in defence, there is an indication that the scheme aims to facilitate collaboration between private players and startups, encouraging joint research and the deployment of deep tech within the Indian defence sector.
While major private entities dominate India’s defence industry, startups are gaining momentum. The government strives to foster equal opportunities and reduce entry barriers for entrepreneurs and startups, notably through initiatives like the Innovations for Defence Excellence program and the ‘Make In India’ initiative. The finance minister has signalled a commitment to encouraging private players and providing a boost to deep tech startups operating in the defence sector.
As per Nasscom, over 3,000 deep-tech startups in India are growing at a compound annual growth rate of 53%. These startups are active in diverse domains like drones, robotics, geographical information systems, and surveillance.
Harnessing deep tech can revolutionise defensive and offensive strategies for future conflicts while bolstering national security. As technology progresses, deep tech is expected to assume an increasingly vital role in shaping the trajectory of India’s defence. Given China’s strategic focus on innovation-driven development, India must leverage deep tech to gain a competitive edge in its defence operations.