India is building a wider and more self-reliant defence industrial base through domestic procurement, defence corridors, startup funding, technology transfers and policy reforms. As per the defence ministry, the effort is moving beyond the traditional public-sector model, creating a larger role for private companies, Micro, Small and Medium Enterprises of India (MSMEs), startups and global investors in the design, development and manufacture of military equipment.
The scale of this shift is reflected in the latest production data. India’s defence production reached a record Rs 1.78 lakh crore in 2025–26, registering 15.6% growth over the previous year and more than doubling from Rs 84,643 crore in 2020–21. Defence exports also rose to Rs 38,424 crore in 2025–26, compared with Rs 686 crore in 2013–14.
As per PIB release, the central government’s initiatives are intended to strengthen national security, reduce dependence on imports, create industrial capacity and position India as a defence exporter. The main pillars include indigenous procurement, simplified acquisition rules, innovation funding, technology transfer, indigenisation lists, defence corridors and easier access for private and foreign investment.
Indigenous procurement drives demand
The Defence Acquisition Council (DAC), the country’s top defence procurement body, has given Acceptance of Necessity for more than Rs 6 lakh crore worth of systems designed by the Defence Research and Development Organisation (DRDO) and manufactured by Indian industry.
These approvals are expected to create a long-term domestic market for Indian defence companies. The key procurement decisions include 97 Tejas Mk-1A fighter aircraft worth around Rs 62,000 crore and 156 Light Combat Helicopter (LCH)- Prachand helicopters valued at approximately Rs 62,700 crore.
These orders can support the development of complete manufacturing ecosystems involving aircraft structures, engines, avionics, weapons, sensors, electronics, materials and maintenance services. They can also provide Indian suppliers with the scale needed to invest in research, testing facilities and production capacity. As per MoD, India’s defence procurement reforms have been built around a gradual shift from buying finished equipment abroad to designing and manufacturing more systems domestically.
Procurement rules are being rewritten
The Defence Procurement Procedure, 2016, laid the foundation for faster acquisition and greater emphasis on ‘Make in India’. It was followed by the Defence Acquisition Procedure, 2020, which expanded opportunities for Indian companies in defence design, development and production.
The proposed Defence Acquisition Procedure, 2026, seeks to simplify acquisition categories and provide stronger support for indigenous design and development. It also proposed indigenous content requirements of up to 60%.
The draft rules can give Indian manufacturers a larger share of government procurement and are also expected to encourage companies to develop products specifically for the armed forces. The policy could also improve visibility for suppliers by creating clearer pathways from prototype development to large-scale military orders.
The Defence Procurement Manual, 2025, has sought to simplify nearly Rs 1 lakh crore in revenue procurement. The manual includes faster approvals, more flexible penalties for indigenous projects and provisions aimed at assuring long-term orders.
For industry, predictable procurement is important because defence manufacturing often requires heavy upfront investment and long development cycles. Companies are more likely to invest in specialised machinery, testing infrastructure and skilled employees when they have greater confidence in future orders.
Startups and deep-tech firms get support
India is also using targeted innovation programmes to bring startups and smaller companies into defence manufacturing. The Innovations for Defence Excellence scheme, or iDEX, has an outlay of Rs 498.78 crore. As of March 2026, it had engaged 676 startups, MSMEs and innovators and resulted in 551 design and development contracts.
The scheme gives emerging companies access to military problem statements, technical support, testing opportunities and procurement channels which is important for technologies such as drones, counter-drone systems, artificial intelligence (AI), robotics, cyber defence, advanced communications, space systems and autonomous platforms.
The ADITI scheme, approved with an outlay of Rs 750 crore for 2023–24 to 2025–26, provides financial assistance through the Defence Innovation Organisation. It is designed to accelerate the development of advanced defence technologies that may otherwise be too expensive or risky for young companies to develop independently.
The Technology Development Fund provides grants of up to Rs 50 crore for critical defence technology projects. As of June 2026, 80 projects worth Rs 334 crore were under implementation. An additional Rs 500 crore corpus has been sanctioned for deep technology and emerging technology projects.
These programmes of the defence ministry can turn ideas into usable defence products faster as they also help the armed forces access new technologies that may not be available through regular procurement.
Technology transfer links DRDO with industry
The government is seeking to convert publicly funded defence research into commercial manufacturing opportunities for Indian companies. Under the Development cum Production Partner framework, DRDO has transferred technologies to 134 partner companies. It has also signed 2,180 technology transfer agreements and opened more than 2,780 intellectual property rights for industry use as of March 2026.
This framework allows companies to use defence technologies developed by government laboratories and adapt them for production. It can reduce development costs and shorten the time needed to bring products to market.
The wider benefit is the creation of domestic expertise in areas such as missiles, radars, electronic warfare, propulsion, materials, unmanned systems and secure communications. Technology transfer can also help smaller firms become suppliers to larger defence companies and public-sector undertakings (PSUs).
Indigenisation lists create a protected market
The government has notified Positive Indigenisation lists, six each through the Department of Military Affairs and the Department of Defence Production. As of August 2026, the lists covered over 5,500 items.
These lists identify equipment and components that the armed forces intend to source from domestic manufacturers, either immediately or over a specified period. The policy gives Indian companies a clearer market opportunity while gradually restricting the import of selected items.
The approach is expected to encourage local manufacturing of components that are often overlooked but critical to defence readiness. These include electronic parts, communication equipment, specialist vehicles, ammunition components, sensors and engineering systems.
However, successful indigenisation will depend on whether Indian suppliers can meet the armed forces’ requirements for quality, reliability, delivery schedules and lifecycle support.
Srijan platform expands the supplier base
The Srijan Defence Equipment Empowerment Platform, also known as DEEP, is being used to connect defence organisations with Indian vendors. As of May 2026 data, the platform listed more than 41,000 vendors and 2.7 lakh products.
The digital repository helps defence public-sector units and other organisations identify domestic suppliers and products. It can improve visibility for smaller manufacturers that may not have direct access to large defence procurement networks.
By bringing more vendors into the system, the platform can support the development of a layered supply chain. Large companies may serve as prime contractors, while MSMEs supply sub-assemblies, components, software and maintenance services.
Defence corridors attract capital
The Uttar Pradesh and Tamil Nadu defence industrial corridors are central to the government’s strategy to create regional manufacturing clusters. The Uttar Pradesh Defence Industrial Corridor had attracted investment commitments of Rs 42,057 crore, of which Rs 4,409 crore had been grounded. The Tamil Nadu Defence Industrial Corridor had attracted commitments worth Rs 32,699 crore, with ₹6,446 crore realised.
These corridors are expected to bring manufacturers, suppliers, testing centres, research institutions and logistics facilities closer together. Clustering can reduce production costs, improve access to skilled workers and make it easier for companies to collaborate.
The BrahMos Integration and Testing Facility in Lucknow has begun manufacturing missiles, providing an example of how major defence projects can anchor a wider industrial ecosystem in a region. For states, defence corridors can generate investment, jobs and demand for supporting infrastructure. For companies, they offer access to industrial land, common facilities and a growing network of defence suppliers.
Easier rules for defence trade and investment
The government has also introduced measures to make it easier for companies to enter and operate in the defence sector. The validity of industrial licences has been extended from seven years, with a possible three-year extension, to 15 years, with a further three-year extension. Lifetime validity has also been granted under the Arms Act.
Longer licence periods give companies greater certainty when planning investments in factories, machinery and product development. The revamped Defence Exim Portal provides end-to-end processing for defence export and import applications. It includes automated company verification, simplified registration, real-time tracking and secure payment integration.
The government has also raised the foreign direct investment limit in defence to 74% through the automatic route and up to 100% through the government route. According to a PIB release, the defence-sector FDI inflows reached around Rs 6,670.59 crore by March 2026 which is aimed at attracting foreign capital, technology partnerships and global defence manufacturers while encouraging production in India.
Private sector contribution is rising
Although defence public-sector undertakings and other public-sector companies remain the largest producers, private-sector participation is expanding. PSUs accounted for approximately 76% of total defence production in 2025–26, while the private sector contributed about 24%, or nearly Rs 42,000 crore. The private-sector share increased from 22% in 2024–25.
The private sector also contributed Rs 17,353 crore, or 45.16%, of India’s defence exports in 2025–26, while defence PSUs accounted for Rs 21,071 crore, or 54.84%. The rising private-sector role can be considered important because these companies are expected to bring additional capital, faster product development, export networks and expertise from commercial industries such as automobiles, electronics, information technology and heavy engineering.
Production growth opens export opportunities
India’s defence exports reached Rs 38,424 crore in 2025–26, with Indian defence products being sold to more than 80 countries. The growth in exports provides companies with a market beyond domestic military orders. It can help manufacturers increase production volumes, spread development costs and improve the commercial viability of indigenous systems.
India’s export portfolio includes missiles, artillery systems, armoured vehicles, naval equipment, radar systems, protective gear, electronic products, ammunition and components. Continued export growth will depend on product quality, after-sales support, competitive pricing and the ability to meet the regulatory requirements of foreign buyers.