The tire used in my spare tire kit appears to have an indentation on the sidewall. Is this a defect?

If the indentation in the tire sidewall is similar to what is described below, it is not a defect and is a common characteristic of radial tire construction. Read further for more details.

The image shown here is a good representation of a sidewall undulation of a radial tire.

Radial tires are designed in such a way that they may have an indentation on the tire sidewall. This can be unsettling for vehicle owners, as it may seem like a defect. Fortunately, this is not a defect but rather a normal occurrence and a common feature of radial tire construction. The reinforcing cords that run across the tire tread from bead to bead have a joining point, which can make the sidewall more rigid and lead to this indent. 

Rest assured, this is a normal characteristic of radial tires. It is more noticeable on tires with taller and more flexible sidewalls. Further resources and information can be found here: Radial Tire Undulations.