Introduction
Since gaining Independence, India has heavily relied on defence imports, particularly to meet its advanced technology needs such as fighter jets, critical weapons, radars, ammunition etc. With growing military needs, this dependency has only increased in value over the years. According to the Stockholm International Peace Research Institute (SIPRI), India was the fifth biggest military spender in the world in 2024, increasing its spending to $86.1 billion, up by 1.6 per cent from 2023 and by 42 per cent from 2015. Interestingly, as per the same report, India was the second-largest importer of major arms in 2020-2024, with 8.3% of global arms imports, trailing only Ukraine.
This level of import dependence has not only exposed the country to budgetary pressures but has also had a serious impact on strategic planning amidst geopolitical fluctuations, shifting supplier relationships and complex technology transfer negotiations. In an era when global uncertainty is emerging as the new ‘normal’, this level of strategic dependency has its serious drawbacks.
On a positive note, over the last decade, there has been a concerted focus towards addressing this important aspect. Importantly, policy initiatives such as ‘Atmanirbhar Bharat’ and ‘Make in India’ have placed self-reliance at the heart of India’s National Defence strategy. The promulgation of Positive Indigenisation Lists, which bans the import of specific defence-related equipment after a certain time period is a major policy boost in favour of the domestic Industry. The urgency and ambition of such apex-level policy initiatives cannot be overemphasised. Pursuing a whole-of-nation approach, India seeks to achieve self-reliance for its defence forces and emerged as a leading player in the global defence economy, especially as we aim to achieve the ambitious target of increasing defence exports to INR50,000 crore by 2029.
From a policy perspective, this focus on indigenous defence production is not driven by security considerations alone. The significant plough-back impact of a strong domestic defence industry is bound to generate large scale employment and stimulate several other high technology sectors as well. As India progresses towards its Viksit Bharat vision of 2047, a strong domestic defence manufacturing sector would not only provide a strong innovation ecosystem but also accelerate diffusion of innovation into strategic sectors such as Space, AI unmanned systems etc.
Reforming Domestic Defence Industry – Challenges and Opportunities
Even with robust policy enablers, transitioning from a predominantly import dependent model to a self – reliant and export-oriented system is a path laden with its own set of challenges. While policy alignment is a must-have imperative, equally important is aligning mindsets of all important stakeholders to suit this new approach. In other words, policy coherence would be an essential criterion for success, right from policy design to its execution stages. Strategic patience and industry- handholding would also be essential as we navigate this challenging course of Atmanirbharta. To be able to compete on the global stage, the nuances of entrenched supply-chain relationships, perceptions on Indian manufactured products and balancing geo-political with geo-economic interests would also emerge as key considerations for policy makers and their advisors.
Another area of concern has been technology transfer, often a cornerstone of defence partnerships. Partial or outdated technology transfer has only impeded efficient defence production and absorption of such advanced technologies. Research and development budget allocation has also not been commensurate with that of the world’s leading defence equipment producers. Consequently, time overruns and project delays have been a common feature, dampening user enthusiasm for supporting domestic projects.
Human resource would also be a significant driver of this vision. As the Indian military embraces high technology systems, such as advanced unmanned systems, AI-enabled war fighting equipment, space-based technologies etc, the need for a highly skilled workforce would be most essential. Having favourable policies to attract and retain top-tier talent would need to be deliberated, both for the public and the private sector.
Our industry would also need to seize this opportunity and break itself from the traditional shackles of limited innovation and actively pivot towards investing capital into research and development, building strong global presence and developing a long – term mindset towards the sector. We would also need to move away from the comfort zone of models such as license production to owning the entire value chain of this business ecosystem.
The market opportunity landscape can be gauged from the fact that these policy initiatives and industry response have already begun to yield dividends. For the period 2024-25, defence exports were at INR 23,622 crore, sustaining a growth of 12.04% over 2023-24, marking a significant milestone in this growth trajectory. Market access has also shown positive trends with big ticket purchases coming in from several African and South-east Asian nations. Further, public-private partnerships are also evolving, synergising the benefits of public sector scale with private sector agility. The startup and MSME ecosystems have also made their mark, introducing innovation in niche technology areas.
Policy Recommendations to Build a Defence Export Powerhouse
Towards accelerating and sustaining this transformation, India needs to adopt a comprehensive and coordinated approach that addresses both structural deficiencies and new opportunities.
Deepen R&D Investment and Collaboration: There is an impending need to scale up public and private investment in defence research and innovation, matching global benchmarks. Establishing collaborative hubs that bring together the armed forces, industry, research institutions, and universities will foster critical breakthroughs – especially in electronics, materials science, and AI. At the same time, reforming our R&D policies to reward risk and accelerate cycles of experimentation and adoption will help bridge the gap with more established export economies.
Streamline Procurement and Export Processes: Simplifying procurement and export licensing, ensuring clear timelines, and minimising procedural approval chains will make India a more agile defence producer and exporter. Introducing digital platforms for application tracking, regulations, and supply chain monitoring can reduce timelines and boost investor and industry confidence.
Strengthen Indigenous Supply Chains and Skill Development: Human resources would form a bedrock of this transformation and therefore, all important stakeholders would need to support targeted upskilling programs, including industry-academia partnerships, to rapidly scale capacity in advanced manufacturing, software engineering, and systems integration. Encouraging import substitution in sub-systems through tax incentives, R&D grants, and milestone-based contracts, especially for start-ups and MSMEs willing to take risks would further accelerate this process.
Incentivise Exports and International Collaboration: There is a need to provide structured incentives—such as export credits, marketing support, and government-to-government framework agreements—to help Indian firms break into established foreign markets. Equally important is the need to prioritise strategic cooperation with countries that are likely buyers, and ensure platforms are designed with adaptability and interoperability in mind. International joint ventures would also need to be leveraged to both access new technologies and demonstrate credibility in foreign procurement cycles.
Building Public-Private Trust and Long-Term Commitment: Policy certainty and avoidance of frequent policy changes would go a long way in reassuring the industry of long-term demand and stable timelines. Further, we would also need to foster cross-institutional trust by integrating start-ups, MSMEs, and large-scale manufacturers through consortia or project-based alliances, so that innovation is not the exclusive preserve of a few legacy players.
The Last Word
The journey ahead, still, remains a long one, and needs to be navigated with a steady hand, embedding timely course corrections. Measuring success not purely in monetary terms, but also through creation of critical capabilities and Intellectual Property would also add winds to our vision. Much progress has been made in this space over the last few years, setting the stage for serious growth in the coming years. For this transformation to be truly successful and enduring, we would need to de-risk all key stakeholders through policy incentives, liberalised tax regimes and other supporting enablers. Ultimately, a dynamic Public-Private defence manufacturing ecosystem, supported by robust policy accelerators, would be a major contributor towards our overall vision of Viksit Bharat 2047.
Author’s Bio:
Puneet Balasubramanian is a distinguished Navy Veteran, and a seasoned Defence & Aerospace Industry leader. He is an alumnus of AMPPP Co’2020 and regularly writes on matters of public policy, strategy and national security.