The Indian defence ecosystem represents a strategic collaboration between the government and the defence manufacturing industry. Over the past decade, India’s defence exports have witnessed remarkable growth, rising from Rs. 686 crore (US$ 81.1 million) in FY14 to Rs. 23,622 crore (US$ 2.76 billion) in FY25. Private sector contributions reached Rs. 15,233 crore (US$ 1.80 billion), while Defence Public Sector Undertakings (DPSUs) accounted for Rs. 8,389 crore (US$ 992.2 million). In FY26 (April-September 2025), defence exports have already reached Rs. 9,131 crore (US$ 1.07 billion), marking a continued upward trajectory.
The Ministry of Defence (MoD) was allocated a total budget of Rs. 6.81 lakh crore (US$ 78.7 billion) for FY26, reflecting a 9.5% increase from FY25. Of this, Rs. 1.80 lakh crore (US$ 20.8 billion) has been earmarked for capital expenditure, including the procurement of new weapons, aircraft, warships, and other military equipment. Additionally, Rs. 7,146 crore (US$ 825.7 million) has been allocated to the Border Roads Organization (BRO) to strengthen infrastructure along strategic borders.
India is also advancing indigenous defence manufacturing capabilities. The Indian Coast Guard (ICG) and Jindal Steel & Power (JSP) signed a Memorandum of Understanding to supply indigenous marine-grade steel for shipbuilding. The Defence Research and Development Organisation (DRDO) received an increased allocation of Rs. 26,816 crore (US$ 3.2 billion) for FY26, up 12.41% from FY25, to support R&D initiatives across defence technologies. Annual defence production reached a record Rs. 1,50,590 crore (US$ 17.57 billion) in FY25, an 18% increase from FY24 and a 90% rise from FY20. The government targets defence manufacturing worth Rs. 3,00,000 crore (US$ 34.7 billion) by FY29.
Technological advancement and innovation remain central to India’s defence strategy. By February 2025, 549 problem statements had been opened under the iDEX initiative, involving 619 startups and MSMEs, resulting in 430 contracts. India plans to deploy a constellation of 52 satellites by 2030 to enhance space-based surveillance for the Army, Navy, and Air Force, improving enemy tracking, border monitoring, and real-time operational coordination.
International collaboration is also strengthening India’s defence ecosystem. Under the India-United States Defence Acceleration Ecosystem (INDUS-X), Indian and American startups can co-develop advanced technologies, including in space and artificial intelligence. In February 2025, India secured a Rs. 3,800 crore (US$ 440.3 million) deal to export BrahMos missiles to Indonesia, highlighting the country’s advanced defence manufacturing capabilities, which include 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-June 2025.
Notable trends in the defence manufacturing sector
- The value of defence production in the country for 2024-25 stood at Rs. 1,50,590 crore (US$ 17.57 billion) while new defence public sector undertakings stood at Rs. 21,821 crore (US$ 2.55 billion).
- The Department of Defence Production granted 1,762 export authorisations in 2024-25, a 16.92% rise from 1,507 in 2023-24, while the count of exporters grew 17.4% over the same period.
- On January 1, 2025, the Ministry of Defence launched the ‘Year of Reforms’ to modernise the Armed Forces with advanced technology, joint operations, simplified acquisitions, and enhanced defence exports.
- Aero India 2025, held from February 10-14, 2025, at Yelahanka Air Force Station in Bengaluru, featured India’s commitment to indigenous defense manufacturing, with events like the Defence Ministers’ Conclave, CEOs’ Roundtable, and iDEX start-up showcase.
- On July 25, 2025, the Ministry of Defence signed a Rs. 2,000 crore (US$ 233 million) contract with Bharat Electronics Limited for Air Defence Fire Control Radars with 70% indigenous content, boosting the Indian Army’s readiness and supporting local defence industries.
- 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.
- India and the Philippines elevated their bilateral relations to a strategic partnership on August 5, 2025, focusing on defence cooperation, including the Philippines' acquisition of the BrahMos missile system from India.
- 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.
- As of February 2025, more than 38,000 items are available for public view, and 14,000 items have been indigenized under the Self-Reliant Initiatives through Joint Action (SRIJAN) portal.
- 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 for providing 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.
- 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).
- 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 multirole 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.
- 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.
- 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.
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.
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.
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.
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.
India’s defence sector is entering a dynamic phase of growth, underpinned by strong indigenisation, innovation, and strategic international partnerships. With record production levels, rising exports, and significant investment in startups, MSMEs, and advanced R&D initiatives, the country is steadily enhancing self-reliance in critical technologies. Ongoing infrastructure development, Defence Industrial Corridors, and modernisation of the Armed Forces are further boosting operational capabilities. Looking ahead, India is set to emerge as a global hub for defence manufacturing, advanced aerospace technologies, and strategic defence exports, strengthening both national security and its international presence.
