After Finance Ministry in India hiked FDI under automatic route to 74% in defence production, the province of UP, situated in Northern India offers a favourable business environment. The state has formed a 6 node defence corridor that offers a host of incentives to manufacturers. Already numerous international and domestic companies are showing interest in setting up production facilities in the state. The state also has a plethora of cheaply priced land banks available.

1. Strong Reasons to set-up Defence Manufacturing in Uttar Pradesh Defence Corridor
After Finance Ministry in India hiked FDI under automatic route to 74% in defence production, the
province of UP, situated in Northern India offers a favourable business environment. The state has formed
a 6 node defence corridor that offers a host of incentives to manufacturers. Already numerous international
and domestic companies are showing interest in setting up production facilities in the state. The state also
has a plethora of cheaply priced land banks available.
In a post COVID world, global manufacturers are increasingly realizing the risk of
concentrating their entire supply chain in one destination. There is renewed interest in scouting
other alternate destinations for business continuity.
As the existing heavily China-dependent supply chain looks fragile, India is a natural
alternative for many large and mid-sized manufacturers. The county has witnessed a sharp rise
in FDI inflow in recent years backed by simplified investment policies, persistent business
reforms, & sustained infrastructure development. Even during COVID period, India received
USD 22 billion of FDI capital, as per a Govt. think tank.
Numerous industrialized provinces/ states in India are drawing manufacturer’s attention.
States such as Maharashtra (which houses Mumbai, the commercial capital of India), Gujarat,
and other southern Indian provinces are featuring on the radar of companies that are relooking
their supply chain strategy.
However, giving them stiff competition is the province of Uttar Pradesh (U.P) located in
Northern India. U.P, which is also the most populous state of India, is aggressively stepping up
its game to lure international investors through a host of policy, sector-based, & labour reforms.
The State has near around 100,000 acres of GIS mapped land bank, which is further helping in
its ascend on the global map.

2. The government of UP is taking an Institutional yet entrepreneurial approach to incentivize
manufacturers, industries, & service companies to come and set-up in UP. Already Microsoft
has shown strong interest in developing a knowledge centre in the province. Japanese firms are
in advance stage of discussion to establish business operations in UP. These include fish
hatcheries, solar power plant, & food processing factories.
Riding the Defence Curve: Drawing the attention of Global Manufacturers
Alongside numerous sectors, such as textile, food processing, pharmaceutical; UP offers a
favourable atmosphere for international and domestic defence manufacturers to set-up and
expand their business. In 2018, the dedicated defence production corridor has already been
announced in UP. Named as Uttar Pradesh Defence Corridor (UPDC), it will incorporate 6
nodes- Kanpur, Lucknow, Agra, Jhansi, Aligarh, and Chitrakoot. Land acquisition at four of the
nodes has already started.
Defence is a strategic sector for India, as the country is embarking on modernizing its military
facilities. India currently is the largest military equipment and hardware importers in the world,
accounting for around one-tenth of overall import.
By 2027, the defence market of India is expected to cross USD 250 billion. The current domestic
capacity is around USD 80 billion. However, going forward India wants to become self-reliant

3. in defence production. To fuel its vision of self-dependency, the Finance Ministry has allowed
74% FDI under the automatic route in the defence sector. Over 100 items have been put under
the negative list of import to push forward domestic production. Going forward, the negative
list will be further extended.
Incentives to set-up defence manufacturing in UP Defence Corridor (UPDC)
The defence corridor in UP will spread across around 12,000 acres of land. Out of which,
around 3000 acres of land has already been acquired. UPDC is expected to generate around
250,000 employments in total. The province already has state-run defence production factories,
military bases, R&D facilities, testing facilities, which will further dovetail the industry in a
positive direction.
To further incentivize growth, the state government is offering a host of incentives, which
includes- 25% reimbursement of land cost, 75% reimbursement of the cost of technology
transfer to anchor units, & transportation subsidy. It has also roped in prestigious institutions

4. such as IIT-Kanpur & IIT-BHU to work as knowledge partners for R&D in defence and
aerospace sector.
A defence expo was also conducted in the capital Lucknow during February this year, which
saw the overwhelming response as over 1000 companies spanning across 70 nations visited.
These included state-run companies, private defence manufacturers, & numerous start-ups
operating in the defence technology space. Following the expo, the government of UP has
signed more than 20 MOUs worth USD 7 billion. Latest to join the show is the German defence
giant Rheinmetall, which wants to set up manufacturing facilities in the UPDC.
Domestic companies are also showing strong interest. 11 MOUs have been signed in Aligarh as
a 131-acre industrial block has been completely sold out. Domestic manufacturers from Delhi &
Aligarh will commence productions for numerous items related to hand grenades, unarmed
aerial vehicles (UAVs), & communication devices. Indian Navy is also set to develop an R&D
facility in UPDC.
Larger Role in Defence Exports

5. The Modi led Indian government also envisions playing a larger role in the export of defence
items. Going forward, India plans to export USD 5 billion of defence products to various
friendly nations in Asia & Africa over the next 5 years.
A separate export promotion cell has been formed under the Ministry of Defence to boost
export activities. Higher-level diplomatic talks are taking place with various countries to
understand their defence requirements.
In addition to domestic manufacturers, foreign-based original equipment manufacturers can
also leverage the initiatives by the government and export their products to new markets.
Besides seemingly large domestic demand, international markets can open new revenue
streams for UPDC and other prominent Indian defence production clusters.
Currently, major export destination includes Italy, Russia, Spain, Chile, UAE, Egypt, KSA, Sri
Lanka, & Nepal. Major export items include personal defence equipments, offshore patrol
vassals, coastal surveillance systems, helicopters, radar components, etc.
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advisory. If you are a domestic or an international defence manufactures looking to set-up in
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