The Government of India needs to nurture and assist SMEs with proven track records. SMEs who have specialised in their own domains which may be electronics,hydraulics, pneumatics or mechatronics and so on need to be provided facilities of interacting with government agencies, manufacturing establishments, DPSUs, so that they get familiar with defence technology and the specialization involved in those technologies. They would then be able to provide their services or products that can be integrated into the holistic platform. The government also needs to create a new classification of A&D SMEs. This is very important because, once a special classification of a defence SME or an aerospace SME is established, that SME could be entitled to special incentives, funding packages and so on.
The government also needs to create R&D funding facilities for those SMEs involved in design and development of products that will result in significant saving of foreign exchange, because ther imported equipment are very expensive, not only to import but also to support as a part of maintenance. The Government will then have to facilitate the formation of Defence clusters along with their own self-contained common facilities centres across the country. The Government should also simplify the import and export procedures because quite a significant amount of materials, especially electronic components are imported and the procedures of import by paying duties and then claiming the duty drawbacks etc. are very cumbersome. Finally the government would do well to provide some tax incentives to encourage the participation of SMEs into the priority sectors, that is, defence and aerospace.