Inside India’s Rs 1.46-lakh-crore defence push – and the race to prepare for the next drone war

That success, however, has also narrowed the public debate. Quadcopters are only one part of an unmanned force. The next generation includes loitering munitions that circle over an area before striking; larger aircraft that can watch a battlefield for hours; pilotless aircraft designed to fly alongside fighters; solar-powered platforms that operate near the edge of space; and unmanned vessels that patrol above and below the sea. These systems are more complex and often far more expensive. They also require a deeper industrial base than one built around assembling imported motors, sensors and airframes.

These systems are more complex and, in many cases, far more expensive. They also demand a deeper industrial base than assembling imported motors, sensors and airframes.

New Delhi’s operational experience from Operation Sindoor brought the value of unmanned systems into sharp focus. Official accounts say Pakistan used drones and loitering munitions, which were neutralised by Indian air-defence systems. Open-source analysis indicates that India also employed loitering munitions against high-value targets. The lesson was not simply that India needs more drones. It needs different systems to work together from finding targets, sharing information, surviving electronic interference and defeating incoming drones across different altitudes and operational domains.

The industrial question follows naturally: Is India preparing only for the systems that have become visible in recent wars, or for the unmanned battlefield that is now taking shape?

Procurement Is Moving Beyond Tactical Drones

The clearest evidence of a shift lies in what the Indian Armed Forces are beginning to ask for.

In August 2025, the Defence Acquisition Council (DAC) granted its initial procurement clearance, known as an Acceptance of Necessity (AoN), for Medium-Altitude Long-Endurance (MALE) remotely piloted aircraft (RPA) for all three services. These are much larger than tactical drones and are designed to remain airborne for extended periods while surveying wide areas. The clearance allows the acquisition process to begin; it is not yet a purchase order.

The same meeting approved Compact Autonomous Surface Craft (CASC), which are unmanned boats intended to help detect and track submarine threats for the Indian Navy as part of a wider package valued at approximately Rs 67,000 crore. The announcement did not disclose the number of vessels or their individual cost. More precise figures reported since then should therefore be treated as industry projections until a tender or contract establishes the programme’s actual value. The direction of procurement is nevertheless clear.

In December 2025, the DAC approved another package of roughly Rs 79,000 crore. It included loitering munitions—one-way attack drones that search for a target before striking—for Indian Army artillery regiments; systems designed to detect and disable hostile drones; and the leasing of High-Altitude Long-Endurance (HALE) aircraft for the Indian Navy. These larger aircraft can remain aloft for extended periods and monitor vast maritime areas.

India’s defence-innovation programmes are also supporting autonomous underwater vehicles for mine-clearing and submarine-tracking missions.

Most of the underwater projects remain at the development or testing stage. Taken together, however, these decisions show that India’s requirements are no longer confined to short-range surveillance. They now extend from relatively inexpensive attack systems on the front line to long-endurance aircraft, unmanned naval vessels and defences against hostile drones.

These approvals will not translate into immediate revenue. Some programmes are already generating business, while others still face trials, tendering and price negotiations. That distinction matters to companies and investors assessing the sector.

Long-Endurance Platforms Are Reshaping the Value Chain

Moving from a quadcopter to a MALE aircraft is not simply a matter of building a larger drone. It transforms a relatively simple product into a complex aerospace and communications programme.

A tactical drone can be controlled from nearby and carry a basic camera. A long-endurance aircraft must fly for many hours, see across large distances, communicate beyond the operator’s direct line of sight and continue working when signals are disrupted. The airframe is only the most visible part. Much of the strategic and commercial value lies in its sensors, secure communications, onboard computers, ground-control systems and long-term maintenance.

This is why India’s MALE programme could be more consequential than its headline procurement value suggests. If domestic-content rules produce local assembly while the critical sensors, communications and software remain imported, India may create manufacturing activity without controlling the technologies that determine how the aircraft performs.

The Defence Research and Development Organisation’s (DRDO) Archer-NG (Next Generation) is India’s attempt to build a home-grown aircraft in this category. It is being developed first for long-duration surveillance, with an armed version planned later. Its real test will not be the specifications advertised during development, but whether it can meet military requirements, carry different sensors, enter production at a predictable cost and remain reliably available in service. The same applies to private-sector contenders: military programmes are ultimately won through performance and long-term support, not demonstration flights alone.

Combat Teaming Raises the Technological Stakes

At the higher end of the spectrum sits Hindustan Aeronautics Limited’s (HAL) Combat Air Teaming System (CATS). Its central component, CATS Warrior, is a pilotless combat aircraft designed to fly alongside a crewed fighter. It could scout ahead, carry weapons, act as a decoy, disrupt enemy systems or widen the pilot’s view of the battlefield.

HAL’s own disclosures reveal both the promise and the distance still to travel. Its 2024–25 annual report presented CATS as a major self-reliance programme. In a May 2026 earnings call, the company said it had completed a successful ground run, was building the actual unmanned aircraft and expected a possible first flight in 2027.

The timeline offers a useful reality check. Such an aircraft must combine many of the demands of a fighter jet with the autonomy of a drone. Its engine, flight controls, communications, weapons and software must work together reliably at combat speed. A delay in any one component can hold back the entire programme.

CATS could eventually create a new product category for HAL. In the nearer term, however, the business opportunity may lie in Indian-made computers, flight controls, communications equipment, electronic-warfare systems and lightweight materials that can be used across several future aircraft.

HAPS Bridges the Gap Between Aircraft and Satellites

High-altitude platform systems (HAPS), commonly called pseudo-satellites, are unmanned aircraft or airships designed to remain near the edge of space for long periods, above conventional aircraft but below satellites. They illustrate how far unmanned technology has moved beyond the quadcopter.

India is pursuing at least two distinct technical approaches. The first is CSIR–National Aerospace Laboratories’ solar-powered fixed-wing high-altitude platform. NAL says its subscale vehicle has flown for more than 10 hours at about 25,000 feet using hybrid solar and battery power. CSIR–NAL has set a target of 2027 for a full-scale flight at around 20 kilometres.

The second is DRDO’s Stratospheric Airship Platform, a large unmanned balloon-like craft. In May 2025, a prototype climbed to approximately 17 kilometres during a 62-minute trial, testing whether it could be controlled and operated safely at that altitude.

Neither platform is a satellite replacement in the literal sense; instead, their value lies in occupying the space between conventional aircraft and orbit. A high-altitude platform could remain over a region for long periods, providing surveillance, communications relay, environmental monitoring or disaster connectivity. Unlike a satellite, it can potentially be recovered, upgraded and redirected. Unlike a conventional aircraft, it is designed for exceptional endurance.

Keeping a platform aloft at that height is difficult. Solar-powered aircraft must be light enough to fly through thin air while carrying batteries that keep them operating through the night. Airships must withstand extreme temperatures and prolonged exposure to sunlight while holding their position over a particular area.

These are not niche aerospace problems. They create potential demand across advanced materials, energy storage, power electronics, sensors and telecommunications. HAPS is therefore one of the clearest points of convergence between India’s defence, space and clean-technology ambitions. It is also a reminder that the next drone supply chain will not belong exclusively to traditional aircraft manufacturers.

Maritime Autonomy Advances as Logistics Remains a Gap

The Indian Navy’s growing interest in autonomous surface and submersible vessels broadens the market further. The August 2025 DAC approval for CASC specifically linked the requirement to detecting, classifying and neutralising ASW threats. Such systems can extend surveillance, patrol dangerous waters and create distributed sensor networks without exposing a crew.

India already has private companies working on unmanned surface vehicles, including Sagar Defence Engineering. The more important signal, however, is institutional: maritime autonomy has entered formal acquisition planning. This creates opportunities in hull design and control systems, but also in sonar, underwater communications, navigation, satellite connectivity, edge processing and fleet-management software.

Swarming systems are further along than is sometimes recognised. The Indian Air Force (IAF)  has said that its Mehar Baba swarm-drone competitions have generated orders worth approximately Rs 2,000 crore for the unmanned-systems industry. The first competition alone led to sizeable orders for Indian start-ups to develop swarm-enabled systems, underlining that this is no longer just a laboratory concept.

A demonstration involving several coordinated drones, however, is not the same as dependable battlefield performance. A swarm must keep operating when navigation signals are disrupted, communications are jammed, or some of its drones are destroyed. The competitive advantage will therefore come not only from producing large numbers of aircraft, but also from the software that allows them to coordinate and adapt.

Autonomous logistics is another important, but less mature, segment. High-altitude resupply, casualty evacuation and last-mile delivery to forward positions could reduce risk to personnel and vehicles. Public procurement is currently more visible in strike, surveillance and counter-drone systems than in unmanned helicopters or heavy cargo platforms. That gap should be read as an underdeveloped market opportunity, not proof that the requirement will remain marginal. In a contested theatre, sustaining forces may be as important as finding and striking targets.

Orders and Capital Are Beginning to Flow

The business exposure across India’s drone ecosystem is uneven because the market spans platform manufacturers, component suppliers and counter-drone companies.

ideaForge’s FY26 performance offers one indication of recovering demand in tactical systems. The company told investors that it booked approximately Rs 530 crore in orders during the year, its highest annual inflow, and returned to operating profitability in FY26. Its management also cautioned that procurement timing, supply-chain volatility, product mix and working-capital cycles would continue to make results uneven from one period to another. That warning applies to much of the sector.

At the other end of the capital spectrum, Raphe mPhibr raised $100 million in June 2025 in a round led by General Catalyst. The investor described it as its largest commitment to India’s defence ecosystem. The company has since expanded a new test and manufacturing facility in Noida to support larger-scale production. The funding is significant because defence aerospace requires patient capital: prototypes, certification, production tooling and testing consume cash well before large orders become predictable.

Public laboratories are also being paired with private production capacity. In November 2025, CSIR-NAL formalised a collaboration with Solar Defence and Aerospace to develop a 150-kg loitering munition powered by NAL’s Indian-designed compact rotary engine.

The announced design targets a 900-km range, six to nine hours of endurance, navigation when satellite signals are unavailable or jammed and AI-enabled target identification. Those are development objectives, not evidence of an inducted weapon. Still, the model is noteworthy: a government laboratory contributes a critical technology, while industry assumes responsibility for turning it into a manufacturable product.

Counter-drone demand is already producing more visible orders. Zen Technologies disclosed Rs 404 crore in Ministry of Defence (MoD) orders in January 2026, of which Rs 332 crore was for C-UAS systems and Rs 72 crore for simulators and equipment.

Paras Defence separately disclosed a Rs 35.68-crore order for portable counter-drone systems in November 2025.

This creates a parallel market around every offensive drone. As militaries buy more unmanned aircraft, they also need equipment that can detect, jam or physically destroy them. Investors looking only at companies that manufacture complete drones may therefore overlook suppliers of radars, sensors, engines, communications equipment and electronics used across several platforms.

It would nevertheless be premature to attach a drone premium to every defence-electronics company. Exposure should be based on disclosed orders, named programmes or demonstrable intellectual property. A broad capability in electronics or precision engineering does not automatically translate into unmanned-systems revenue.

Sovereign Control Remains the Critical Bottleneck

India has no shortage of prototypes or start-ups. The harder question is how much of the complete system it controls. Engines remain a major constraint as programmes move from small electric drones to heavier, faster and longer-range aircraft. Other gaps include secure satellite communications, sensors capable of seeing over long distances, navigation that works when satellite signals are jammed, and onboard computers that can process information without maintaining a constant link to a ground station.

Software creates another form of dependence. A drone may be assembled in India, but its mission computer, operational data and software updates determine how it performs and evolves after induction. If those remain controlled by a foreign supplier, India’s dependence survives even when the airframe carries a “made in India” label.

The policy framework will have to recognise this difference. The drone production-linked incentive scheme allocated Rs 120 crore over three years and offered an incentive equal to 20% of value addition. It was useful for a young industry, but modest beside the cost and time required to develop MALE aircraft, combat-team systems or stratospheric platforms.

The next policy phase must therefore be built around long-duration development funding, service-backed test programmes and credible production pathways. Innovation competitions can identify promising technology, but companies cannot scale on demonstrations alone. The armed forces need mechanisms to move successful prototypes into small initial production runs, collect operational data and then place repeat orders. Testing infrastructure, certification capacity and access to ranges must grow alongside manufacturing incentives.

Procurement discipline matters just as much. Constantly changing technical requirements can exhaust start-ups and delay established programmes, while emergency purchases may solve an immediate shortage without creating a stable industrial pipeline. The armed forces need room to refine requirements, but industry also needs enough visibility to invest in tooling, suppliers and skilled personnel.

The Real Test Is Scaling Beyond Prototypes

India is not beginning this transition from zero. It has inducted tactical drones, ordered swarm systems, employed loitering munitions in combat, funded private manufacturers and launched public programmes covering long-endurance aircraft and high-altitude platforms. The breadth of activity is considerable.

But breadth is not the same as depth. The decisive test is whether India can move from prototypes and preliminary procurement approvals to dependable production, reliable battlefield performance and domestic control over the technologies that matter most.

The period around 2027 will be revealing. HAL is working towards a possible first flight of CATS Warrior. NAL is targeting a full-scale HAPS flight at 20 kilometres. MALE and maritime-autonomy acquisitions should move further through the procurement cycle. Each milestone will show whether India’s unmanned ecosystem is maturing beyond demonstrations.

Cheap quadcopters and FPV drones will remain indispensable because militaries need them in large numbers. But the advantage will go to forces that combine those numbers with aircraft that fly farther and higher, operate with less human control and continue communicating under attack. No single drone will decide the next unmanned war. The winner will be the force—and the industrial base—that can connect different systems and keep replacing them at scale.

The central question for India is no longer whether it can build drones, but whether it can own the technologies that allow those drones to see farther, communicate under attack, act together, and be replaced at scale.

Aritra Banerjee is a senior journalist specialising in the intersection of defence, space, emerging technologies, industrial policy, and the global energy transition. His work explores how technological innovation, strategic industries, and geopolitics are reshaping national security and economic competitiveness in the twenty-first century.

Disclaimer: The views expressed are the author’s own and do not reflect the official policy or position of Financial Express.

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