India’s shipbuilding landscape is undergoing a transformative shift driven by landmark policy changes, substantial financial support, and a renewed focus on infrastructure integration. In Budget 2025, shipbuilding was officially classified as “infrastructure,” unlocking concessional financing and faster clearances to scale up capacity for modern, large vessels domestically and for export markets. Simultaneously, the government has revamped its Shipbuilding Financial Assistance Policy, Maritime Development Fund, and extended tax incentives to bolster competitiveness. Complemented by the Sagarmala 2.0 initiative and plans for dedicated shipbuilding clusters along India’s coasts, these measures aim to position India among the top five global shipbuilding nations by 2047 and to establish a self-reliant “Atmanirbhar Bharat” maritime ecosystem.
Historical Evolution of Indian Shipbuilding
Shipbuilding in independent India began in intense with the launch of SS Jala Usha, the first modern steamship built at Hindustan Shipyard Limited in Visakhapatnam on 14 March 1948. Over the decades, major public sector yards like Cochin Shipyard Limited (CSL), Hindustan Shipyard Limited (HSL), Garden Reach Shipbuilders & Engineers (GRSE), and Mazagon Dock Limited (MDL) laid the groundwork for indigenous capabilities.
Cochin Shipyard has grown into India’s largest shipbuilding and repair facility, capable of constructing vessels up to 120,000 deadweight tonnes (DWT).
Hindustan Shipyard is the second largest, with an 80,000 DWT capacity and a track record in defence and commercial vessels.
Mazagon Dock Limited and Garden Reach Shipbuilders & Engineers both play pivotal roles in naval ship construction, with MDL building India’s first indigenous aircraft carrier and GRSE exporting military and civilian vessels.
Classification as “Infrastructure” – An ideal shift
In the February 2025 Budget speech, Finance Minister Nirmala Sitharaman announced that “large ships above a specified size” would be added to the Harmonised Master List of infrastructure assets, granting shipbuilding access to long-term, low-cost financing, infrastructure bonds, and tax benefits. Prime Minister Modi underscored this initiative at India Steel 2025, stating, “India aims to manufacture modern and large ships domestically and export them to other countries”.
By adding vessels above the specified size to the infrastructure fold, shipbuilders and shipowners can now tap into extended-tenor loans, lower interest rates, and infrastructure bonds on par with sectors like roads and ports. This dramatically reduces their cost of capital and better aligns repayment schedules with vessel lifecycles, making fleet modernization financially viable and sustainable.
Infrastructure status also brings critical regulatory incentives, customs duty exemptions, faster clearances, and eligibility for viability-gap funding and buyer’s credit that were previously out of reach. These benefits lower entry barriers, accelerate project timelines, and strengthen the global competitiveness of India’s domestic shipbuilding industry.
Finally, integrating shipbuilding into India’s national infrastructure agenda underscores its strategic role in economic development. This move is set to unlock large-scale private investment, merge with initiatives like the Sagarmala port and coastal cluster program, and position India to emerge as a leading global shipbuilding hub by 2047 transforming shipbuilding from a standalone sector into a core driver of national growth.
Financial Backbone
The Union Budget allocated ₹25,000 crore to the Maritime Development Fund, with a 49% government contribution and the 51% mobilised from ports and the private sector. The fund will provide equity, debt, viability-gap funding, and buyer’s credit to shipbuilders, facilitating acquisitions and construction of vessels under Indian flags.
With an outlay of ₹18,090 crore, Shipbuilding Financial Assistance Policy 2.0 aims to level the global playing field for Indian yards by offering credit notes for shipbreaking, supporting cluster development, and enhancing technology adoption.
Customs duty exemptions on inputs for shipbuilding and shipbreaking have been extended by ten years, encouraging circular economy practices through incentivised scrapping and new-build activities.
Infrastructure and Ecosystem Development
Building on the original Sagarmala Programme, Sagarmala 2.0 earmarks ₹40,000 crore of budgetary support to attract ₹12 lakh crore in private and state investment over the next decade. It focuses on shipbuilding, repair, recycling, and port modernisation to boost India’s global maritime competitiveness.
The Ministry of Ports, Shipping & Waterways plans to establish three to four world-class shipbuilding clusters on each coast, with selected sites in Odisha, Andhra Pradesh, Kerala, Maharashtra, and Gujarat, each offering 4–5 km waterfronts and 1,000+ acres for integrated facilities. These clusters will feature common infrastructure, skilling centres, and R&D hubs to drive economies of scale.
Strategic Imperatives and Challenges
Despite robust policy support, India’s shipbuilding sector faces challenges in:
Raw Material Costs – Dependence on imported steel grades, alloys, and components increases input costs, rising demand for pipeline-grade steel underscores the need for specialized domestic production.
Financing and Scale – While MDF provides long-term debt, higher interest rates and longer gestation periods for large vessels remain.
Technology and Skill Gaps – Modern shipbuilding demands advanced automation, digital design, and specialized manpower; Sagarmala’s startup and innovation initiatives aim to bridge these gaps.
Global Competition – Competing with established shipbuilding powers (South Korea, Japan, China) will require stringent quality standards, cost competitiveness, and fast delivery cycles.
Toward a Global Maritime Hub
The government’s target of elevating India into the top five shipbuilding nations by 2047 is mirrored by ambitions to build modern commercial, defence, and specialized vessels for export. With integrated policies from infrastructure status and financial backstops to port-led development and cluster formation India is charting a course for sustained growth in shipbuilding. The confluence of strategic financing, policy incentives, and ecosystem investments positions India to not only meet domestic maritime requirements but also to become a net exporter of ships, contributing to economic growth, employment, and global trade leadership.
In embracing this multi-pronged approach, India’s shipbuilding sector is poised for a renaissance transforming “skeleton” steel into world-class ships and steering the nation toward maritime self-reliance and global prominence.
