Defence Manufacturing Industry in India

Recent development/Investments

The Indian Defence Manufacturing sector has seen some major investments and developments in the recent past.

• The defence R&D allocation increased from Rs. 13,716 crore (US$ 2.24 billion) in FY15 to Rs. 29,100 crore (US$ 3.08 billion) in FY27, reflecting the government's continued focus on strengthening indigenous defence innovation. In 2024, the Ministry of Defence allocated Rs. 1,757 crore towards promoting participation from industry, start-ups, and academia in defence R&D.
• As of May 2026, the SRIJAN portal had facilitated the indigenisation of more than 15,700 defence items, including 3,204 items under the Positive Indigenisation Lists (PILs), while five PILs covering 5,012 DPSU items had been notified.
• In May 2026, the Ministry of Defence signed a contract worth Rs. 1,476 crore (US$ 156.39 million) with Bharat Electronics Limited (BEL) for the procurement of five Ground-Based Mobile Electronic Systems (GMES) to enhance the Indian Army's electronic warfare capabilities.
• In March 2026, the Ministry of Defence signed a contract worth Rs. 1,950 crore (US$ 220.66 million) with Bharat Electronics Limited (BEL) for the procurement of Low-Level Transportable Radar (LLTR) - Ashwini systems for the Indian Air Force, strengthening indigenous air surveillance capabilities under the Aatmanirbhar Bharat initiative.
• On March 27, 2026, the Ministry of Defence signed contracts worth Rs. 858 crore (US$ 97.09 million) for the procurement of the Tunguska Air Defence Missile System for the Indian Army and the depot level inspection of P8I Long Range Maritime Reconnaissance Aircraft for the Indian Navy. The contracts are expected to strengthen India's air defence capabilities while supporting indigenous maintenance and repair infrastructure.
• On February 12, 2026, India cleared a military modernisation plan worth US$40 billion (Rs 3.6 lakh crore approx.), including acquisition of advanced fighter jets and maritime aircraft to strengthen air and naval combat capabilities.
• On February 12, 2026, India proposed a new Defence Acquisition Procedure (DAP-2026) to streamline procurement processes, enhance private sector participation, and align acquisitions with evolving security needs.
• Crisil Ratings said India’s private defence firms are expected to grow revenues by 16-18% in FY26, after posting a ~20% compound annual growth rate between FY22 and FY25.
• On January 16, 2026, India proposed easing foreign direct investment norms in defence to allow up to 74% under the automatic route to attract global companies and advanced technologies.
• Aero India 2025, held from February 10-14, 2025, at Yelahanka Air Force Station in Bengaluru, featured India’s commitment to indigenous defence manufacturing, with events like the Defence Ministers’ Conclave, CEOs’ Round-Table, and iDEX start-up showcase.
• On January 1, 2026, India’s Ministry of Defence signed capital procurement contracts worth US$21.9 billion (Rs 1.82 lakh crore) in FY 2025–26 (till December) to enhance military modernisation and infrastructure.
• On December 15, 2025, Bharat Electronics Limited secured defence orders worth US$93 million (Rs 776 crore), reflecting strong domestic demand for indigenous defence electronics systems.
• Defence Exhibition Organisation (DEO) under the Ministry of Defence anchors India’s two mega events, DefExpo and Aero India, providing institutional support and international outreach for defence trade fairs and delegations.
• On December 13, 2025, the Uttar Pradesh Defence Industrial Corridor attracted investments worth US$4.2 billion (Rs 35,000 crore), expected to generate around 52,000 jobs and boost defence manufacturing capacity.
• In December 2025, India’s defence production crossed US$18 billion (Rs 1.5 lakh crore approx.), reflecting steady growth driven by indigenisation and increased private sector participation.
• Goldman Sachs expects India’s private defence firms to deliver 32% annual EPS growth between FY25 and FY28, driven by rising exports and indigenisation. The domestic market is projected to expand to Rs. 10,00,000 crore (US$ 122 billion) over the next 20 years.
• On October 17, 2025, Mahindra Group and Embraer Defence & Security signed a Strategic Cooperation Agreement to introduce the C 390 Millennium military transport aircraft to India under the Indian Air Force’s Medium Transport Aircraft programme.
• India’s GST 2.0 is set to modernise defence procurement, slashing GST on commercial drones to 5% and fully abolishing it on military drones and critical defence equipment like aircraft, missiles, simulators, batteries, underwater systems and software‐defined radios, boosting military readiness, cost efficiency and indigenisation in defence supply chains.
• Bharat Electronics Limited (BEL) and Israel Aerospace Industries (IAI), Israel's leading aerospace and defence company, have announced the establishment of a joint venture company (JVC). The JVC has been set up to provide life cycle support, both technical and maintenance related, for MRSAM air-defence systems of the country.
• 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.
• A Green Propulsion System developed under the Technology Development Fund (TDF) scheme of DRDO, showcased successful in-orbit functionality on a payload launched during the PSLV C-58 mission. The project, led by Bengaluru-based start-up Bellatrix Aerospace Pvt Ltd, surpassed all performance parameters as per Telemetry data from the PSLV Orbital Experimental Module (POEM) at ISRO's Telemetry, Tracking, and Command Network (ISTRAC). This eco-friendly propulsion system, comprising indigenously developed components, offers a non-toxic solution ideal for low orbit space missions with high thrust requirements. The project, overseen by DRDO's Project Monitoring & Mentoring Group, highlights the success of the TDF initiative in fostering innovation within India's defence and aerospace sectors, particularly among start-ups and MSMEs.
• 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 material, with import substitution value worth Rs. 1,048 crore (US$ 126.57 million).
• 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).
• The second Consultative Meeting on Defence Cooperation between India and Jordan was held today in New Delhi. The two countries discussed a range of issues including military training and courses, cyber security, military exercises, military medicine, and capacity building in various areas to enhance defence engagements. Both sides also exchanged their respective capabilities in the defence industry and research & development for forging collaborations in mutually beneficial areas.
• 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 in 2026.
• 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 startups and SMEs in the defence sector through its flagship programme iDEX Prime.
• HAL has built and delivered more than 150 military Do-228 and to a variety of customers. HAL has also constructed two civilian Do-228 aircrafts.