The Indian Defence ecosystem is a confluence between the Government and the defence manufacturing industry.
Ministry of Defence has set a target of achieving an annual turnover of US$ 36.1 billion (Rs. 3 lakh crore) in aerospace and defence services and manufacturing and US$ 6.02 billion (Rs. 50,000 crore) worth of annual defence exports by 2028-29.
In the Union Budget 2025-26:
In 2025-26, the Ministry of Defence (MoD) was allocated a total Budget of Rs. 6.81 lakh crore (US$ 78.7 billion), which is 9.5% YoY increase from 2024-25 budget.
Of this, Rs. 1.80 lakh crore (US$ 20.8 billion) was allocated towards capital expenditure, including the purchase of new weapons, aircraft, warships, and other military equipment
An outlay of Rs. 7,146 crore (US$ 825.7 million) was announced towards the capital expenditures of the Border Roads Organization (BRO).
Indian Coast Guard (ICG) and Jindal Steel & Power (JSP) signed a Memorandum of Understanding (MoU) for the supply of indigenous marine grade steel to enhance the indigenous content in shipbuilding.
Till April 2023, a total of 606 industrial licences were issued to 369 companies operating in the defence sector.
Defence exports crossed Rs. 21,000 crore (US$ 2.43 billion) in CY24 with a target of Rs. 50,000 crore (US$ 5.8 billion) by 2029.
The value of defence production in the country for 2023-24 stood at Rs. 1,27,265 crore (US$ 15.37 billion) while the defence production by PSU’s stood at Rs. 74,434 crore (US$ 8.99 billion). The government has set a target of achieving defence manufacturing worth Rs. 3,00,000 lakh crore (US$ 34.7 billion), by FY29.
Indian and American startups will now be able to co-develop and co-produce advanced technologies, including in areas of space artificial intelligence, under the India-United States Defence Acceleration Ecosystem (INDUS-X).
In February 2025, India has secured a Rs. 3,800 crore (US$ 440.3 million) deal to export BrahMos missiles to Indonesia, showcasing its advanced defence manufacturing capabilities, including the domestic production of aircraft carriers.
The cumulative FDI equality inflow in the Defence industry is Rs. 154 crore (US$ 21.74 million) during the period April 2000-September 2024.
Notable trends in the defence manufacturing sector
- Rolls-Royce intends to significantly increase its supply chain sourcing from India over the next five years, with a particular emphasis on complex aerospace and defense components.
- TechEagle plans to invest Rs. 100 crore (US$ 11.6 million) over the next three years from 2025 to address the growing demand for drones in public safety. The company has recently introduced an autonomous UAV specifically designed for disaster relief and law enforcement, highlighting its advanced domestic engineering capabilities, and has secured a contract with the Himachal government.
- JSW Defence is set to invest Rs. 800 crore (US$ 92.4 million) in Telangana for drone manufacturing. The company has signed a Memorandum of Understanding (MoU) with the Telangana State government to facilitate this initiative.
- Paras Defence & Space Technologies plans to invest Rs. 12,000 crore (US$ 1.39 billion) to establish India’s first Optics Park in Maharashtra, with the project expected to roll out in phases from 2028 to 2035 to ensure scalability and flexibility.
The TATA Aircraft Complex at TATA Advanced Systems Limited (TASL) in Vadodara, Gujarat, inaugurated on October 28, 2024, marks a key step towards India's defense self-reliance. This facility is India's first private sector Final Assembly Line for military aircraft, dedicated to the production of 56 C-295 military transport aircraft, with the first 16 sourced from Airbus in Spain and the remaining 40 manufactured domestically.
Under the Atmanirbhar Bharat Initiative, five positive indigenization lists of 509 products have been promulgated by the Department of Military Affairs and Ministry of Defence to be manufactured domestically for the defence sector, instead of being sourced via imports.
In a major boost to Aatmanirbharta in defence & minimise imports by Defence Public Sector Undertakings (DPSUs), Department of Defence Production (DDP), Ministry of Defence has notified the fifth Positive Indigenisation List (PIL) consisting of 346 items. These include strategically-important Line Replacement Units/Systems/Sub-systems/Assemblies/Sub-assemblies/Spares & Components a raw materials, with import substitution value worth Rs. 1,048 crore (US$ 126.57 million).
SRIJAN portal launched to promote indigenisation. More than 34,000 items are available for public view and 10,000 items have been indigenized till January 2024.
The government has established two Defence Industrial Corridors in Uttar Pradesh and Tamil Nadu.
The Indian defence sector is one of the world’s largest and most profitable industries, with a 10-year pipeline of over US$ 223 billion in aerospace and defence capital expenditure and a projected medium-term investment of US$ 130 billion.
Among the large defence programs expected to be shifted to “Buy Global – Manufacture in India” are 114 Multi-Role Fighter Aircraft (MRFA), with a gradual increase in domestic production.
The FDI maximum in defence manufacturing under the automatic route has been raised from 49% to 74% (for new investments requiring an industrial licence), allowing foreign firms to establish manufacturing units with a greater degree of ownership and control.
India ranks fourth among 12 Indo-Pacific nations in self-reliant arms production capabilities, according to a study released this month by the Stockholm International Peace Research Institute (SIPRI).
Under the ‘Aatmanirbhar Bharat’ campaign, the Indian Aerospace and Defence sector has been identified as one of the key focus areas. There have been various policy changes signalling the end of an era of import dependence and aim to promote India as the most preferred global manufacturing destination for foreign OEMs/Tier-1 vendors.
To achieve the desired growth, the two main cornerstones will be indigenization and self-reliance in defence manufacturing.
Thrust on Modernisation & Infrastructure Development Sustained in Interim Budget 2024: In the Interim Budget 2024-25, the Capital Investment Outlay has been increased by 11.1% to US$ 133 billion (Rs. 11.1 lakh crore), which would be 3.4% of GDP. This also means tripling of the capital expenditure outlay in the past 4 years.
Recognising the crucial role of Research, Innovation and Technological development towards capacity building of the Armed Forces as well as fuelling India’s Mission of Aatmanirbharta.
An allocation of US$ 7.2 million (Rs. 60 crore) was announced for the Technology Development Fund (TDF) scheme, specifically designed to support new startups, MSMEs, and academia engaged in defence-related innovation. This initiative seeks to attract young talent interested in niche technology development, fostering collaboration with DRDO.
Additionally, the Interim Budget 2024-25 announced a corpus of US$ 12 billion (Rs. 1 lakh crore) for Deep Tech, offering long-term loans to tech-savvy individuals and companies. This initiative is expected to accelerate innovation in the defence sector, promoting the development of cutting-edge technologies.
To foster innovation, encourage technology development and strengthen the Defence Industrial ecosystem in the country, iDEX and DTIS have been allocated US$ 14 million (Rs. 116 crore) and US$ 5.4 million (Rs. 45 crore) in the Union Budget 2023-24, respectively representing an enhancement of 93% for iDEX and 95% for DTIS over 2022-23. This will fulfil the Ministry of Defence’s vision to leverage ideas from bright young minds across the country.
In order to promote indigenous design and manufacturing, funds have also been earmarked for procurement from indigenous sources. For FY24, funds have been earmarked in the ratio 67.75:32.25 between Domestic and Foreign procurement in the Capital Acquisition Budget of the Ministry of Defence (MoD). In addition, the MoD has also directed spending an amount of US$ 181.1 million (Rs. 1,500 crore) towards procurement from start-ups.
In June 2024, iDEX signed the landmark 350th contract. The contract was inked with SpacePixxel Technologies Pvt. Ltd. for the design and development of a ‘Miniaturised satellite capable of carrying Electro-Optical, Infrared, Synthetic Aperture Radar, and Hyperspectral payloads up to 150 kgs.
Additionally, the Union Budget 2023-24 has also announced the revamped Credit Guarantee scheme for MSMEs which will take effect from 1st April 2023 through infusion of US$ 1.09 billion (Rs. 9,000 crore) in the corpus. This will enable additional collateral-free guaranteed credit of US$ 24.3 billion (Rs. 2 lakh crore). Further, the cost of the credit has also been reduced by about 1 per cent. This scheme will give a further fillip to the MSMEs associated with the Defence Sector.
BrahMos: A contract was signed for the procurement of 35 combat and three Practice BrahMos missiles for two P-15B ships from M/s BrahMos Aerospace Pvt. Ltd., India for an amount of US$ 209 million (Rs. 1,723 crore).
The Indian Navy received a fully indigenised fuze YDB-60 for underwater Rocket RGB 60 in March 2023 manufactured for the first time by private Indian industry.
Multi-Purpose Vessels: The contract for procurement of two Multi-Purpose Vessels (MPVs) for the Indian Navy from M/s Larsen & Toubro Limited, Mumbai for a total cost of US$ 107 million (Rs. 887 crore) under the Buy (Indian) category was signed in March 2022.
Fast Patrol Vessels: A contract for the construction of eight Fast Patrol vessels (FPVs) for Indian Coast Guard with M/s Goa Shipyard Limited (GSL), Goa at a total cost of US$ 57.6 million (Rs. 473.47 crore) under Buy (Indian) category was signed in March.
The Indian defence manufacturing industry is a significant sector for the economy. Demand growth is likely to accelerate with rising concerns of national security. Growth was observed in the value of production by Defence PSUs due to numerous key product developments through research and development initiatives, in addition to various products and equipment being manufactured through transfer of technology.
The defence manufacturing sector has seen some major developments, investments and support from the Government in the recent past.
Under Mission Raksha Gyan Shakti, 2,389 Intellectual Property Rights (IPRs) (until February 2024) have been granted/registered by the Indian Patent Office.
Defence Research and Development Organization (DRDO) displayed a wide range of 430 products encompassing the strategic and tactical weapon systems, defence equipment and technologies developed in DefExpo 2022 which was held in Gandhinagar, Gujarat from October 18–22, 2022.
The 3rd Edition of Vietnam India Bilateral Army Exercise “Ex VINBAX 2022” is scheduled to be conducted at Chandimandir from 1-20 August 2022.
Indigenously developed Laser-Guided Anti-Tank Guided Missiles (ATGM) were successfully test-fired from Main Battle Tank (MBT) Arjun by the Defence Research and Development Organisation (DRDO) and Indian Army at KK Ranges with support of Armoured Corps Centre & School (ACC&S) Ahmednagar in Maharashtra on August 04, 2022.
India and Rwanda held their inaugural Joint Defence Cooperation Committee (JDCC) meeting in Kigali, Rwanda in February 2024, focusing on bolstering defence collaboration through discussions on training, joint exercises, and defence industry cooperation, with the Indian delegation underscoring the capability of Indian defence manufacturers to export to allied nations.
India and Oman co-chaired the 12th Joint Military Cooperation Committee (JMCC) meeting in Muscat on January 31, 2024, reviewing and applauding the strong defence cooperation between both nations while exploring new avenues for collaboration in training, joint exercises, information sharing, oceanography, shipbuilding, and MRO to enhance mutual trust and interoperability between their militaries.
During his UK visit, Defence Minister, Mr. Rajnath Singh met with top UK defence industry leaders, on January 10, 2024. He discussed enhancing the India-UK defence relationship and welcomed UK investment and technology collaboration, highlighting India's skilled workforce and favourable investment climate.
Defence minister, Mr. Rajnath Singh, participated in the 10th ASEAN Defence Ministers’ Meeting - Plus (ADMM-Plus) in Jakarta, Indonesia, on November 16, 2023. During his address, he emphasized ASEAN centrality and India’s dedication to upholding freedom of navigation and international laws, including UNCLOS 1982, in international waters and called for regional security initiatives that are consultative and development oriented.
In October 2023, Defence Minister Mr. Rajnath Singh engaged in discussions with Italian Defence Minister Mr. Guido Crosetto during his visit to Rome. The talks focused on exploring opportunities for collaboration in defence industrial cooperation, covering areas such as security, research and development, co-development, co-production, and the establishment of joint ventures. An agreement was signed to further promote cooperation across these diverse defence domains, reflecting the commitment of both nations to enhance bilateral defence ties.
The 10th meeting of the Sub Committee on Military Cooperation between India and Malaysia was held in New Delhi on July 27, 2023. During the meeting, the existing defence cooperation between the two countries both sides explored effective and practical initiatives to further expand the bilateral defence engagements.
The 8th India-Australia Defence Policy Talks (DPT) was held at Canberra in Australia on July 24-25, 2023. During the Defence Policy talks, both sides reviewed the bilateral defence cooperation between the two countries and explored new initiatives to further strengthen and deepen bilateral defence engagements. The discussions also focused on identifying ways to strengthen partnerships in the co-development and co-production of defence equipment.
The 8th India-Thailand Defence Dialogue was held in Bangkok on April 20, 2023. The meeting was co-chaired by the Special Secretary, Ministry of Defence, India Smt Nivedita Shukla Verma and Deputy Permanent Secretary for Defence of Ministry of Defence, Thailand General Nuchit Sribunsong. During the meeting, both sides expressed satisfaction at the ongoing defence cooperation between the two countries.
Ministry of Defence, on March 31, 2023, signed a contract with Ultra Dimensions Pvt. Ltd. (UDPL), Vishakhapatnam for the modernisation of Naval Aircraft Yards (NAYs) at Goa and Kochi, at a cost of approximately US$ 57.4 million (Rs. 470 crore). The modernisation will augment the operational readiness of Naval Aviation Platforms and reduce dependence on external agencies and foreign Original Equipment Manufacturers (OEMs) for repairs. This project will be a proud flag bearer of ‘Aatmanirbhar Bharat’.
Providing a further boost to ‘Aatmanirbharta’ in defence, the Ministry of Defence, on March 30, 2023, signed contracts for procurement of improved Akash Weapon System and 12 Weapon Locating Radars, WLR Swathi (Plains) for the Indian Army at an overall cost of over US$ 1.11 billion (Rs. 9,100 crore).
The Union Cabinet has accorded approval to sign a contract with Larsen & Toubro Limited (L&T) for the acquisition of three Cadet Training Ships, at an overall cost of US$ 379.5 million (Rs. 3,108.09 crore), under Buy {Indian-IDDM (Indigenously Designed, Developed and Manufactured)} category. The delivery of ships is scheduled to commence from 2026.
In June 2022, the Ministry of Defence approved the procurement of military equipment and platforms worth US$ 9.84 billion (Rs. 76,390 crore) from domestic industries.
In June 2022, the Ministry of Defence signed a deal for the Astra Mk 1 Beyond Visual Range (BVR) AAM and associated equipment, at a cost of US$ 382.79 million (Rs. 2,971 crore).
The Startup Incubation and Innovation Centre, IIT-Kanpur (SIIC IIT-Kanpur) recently signed an MoU with the Defence Innovation Organisation (DIO) to nurture and support start-ups and SMEs in the defence sector through its flagship programme iDEX Prime.
The government has established two Defence Industrial Corridors (DICs) in the country, one in Uttar Pradesh called the Uttar Pradesh Defence Industrial Corridor (UPDIC) and the other in Tamil Nadu called the Tamil Nadu Defence Industrial Corridor (TNDIC), with the goal of attracting US$ 1.31 billion (Rs. 10,000 crore) in investment in each.
The defence minister, Mr. Rajnath Singh handed over two 'Made In India' platforms, a Fast Patrol Vessel and a Landing Craft Assault ship, to the Maldives National Defence Forces, during a visit to the country in May 2023.
India and the Maldives conducted the 4th Defence Cooperation Dialogue (DCD) in Male, Maldives on March 19, 2023. During the interaction, the two nations reviewed the ongoing bilateral defence cooperation activities and both sides apparently expressed satisfaction at the increasing engagements.
In November 2021, the Defence Acquisition Council (DAC) boosted the ‘Make In India’ initiative by according to Acceptance of Necessity (AoN) — to capital acquisition proposals worth US$ 1.07 billion (Rs. 7,965 crore) — for modernisation and operational needs of armed forces.
In November 2021, the Defence Research and Development Organisation (DRDO), India and the Directorate of Defence Research and Development (DDR&D), Ministry of Defence, Israel, entered a Bilateral Innovation Agreement (BIA) to promote innovation and R&D in start-ups and MSMEs of both countries for the development of dual-use technologies.
The defence ministry plans to put 101 defence items (artillery guns and assault rifles) under import embargo to offer potential military hardware manufacturing opportunities to the Indian defence industry.
In February 2024, Defence Minister stated it is decided that 75% of the capital acquisition budget will be used for procurement from local companies.
India is also developing high-altitude long-endurance unmanned aircraft for surveillance and reconnaissance applications.
The Indian government is focussing on innovative solutions to empower the country’s defence and security via ‘Innovations for Defence Excellence (iDEX)’, which has provided a platform for start-ups to connect to the defence establishments and develop new technologies/products in the next five years (2021-2026). The Defence Ministry has set a target of 70% self-reliance in weaponry by 2027, creating huge prospects for industry players. The defence ministry estimates a potential contract worth US$ 57.2 billion (Rs. 4 lakh crore) for the domestic industry in the next 5-7 years (2025-2027).
