India’s defence sector has seen notable growth in local production, with a domestic defence manufacturing output of ₹1.27 lakh crore reported for the 2023-24 financial year, according to the Ministry of Defence.
This represents a significant rise from ₹46,429 crore in 2014-15 — a 174% increase over the past decade — achieved through a series of policy measures aimed at supporting domestic manufacturing under the government’s broader Atmanirbharta (self-reliance) initiative.
India has historically relied on imports to meet its military equipment needs, with dependency on foreign suppliers previously estimated at around 65-70%. However, recent Ministry data indicates a shift, with approximately 65% of India’s defence equipment now being manufactured domestically.
This transition is supported by a growing defence industrial base, which includes 16 Defence Public Sector Units (DPSUs), over 430 licensed private companies, and approximately 16,000 Micro, Small, and Medium Enterprises (MSMEs). According to the MoD, the private sector now accounts for about 21% of total defence production.
Indigenous Defence Capabilities
According to the Ministry of Defence, recent strides in domestic defence production include systems such as the Dhanush Artillery Gun System, Advanced Towed Artillery Gun System (ATAGS), Main Battle Tank Arjun, and the Light Combat Aircraft Tejas.
The Ministry also noted the commissioning of India’s first indigenously produced aircraft carrier, INS Vikrant, as a milestone in enhancing the nation’s defence capabilities and reducing dependency on foreign imports.
The government aims to achieve a defence production target of ₹1.75 lakh crore by the end of the current financial year, with a long-term goal of reaching ₹3 lakh crore in annual defence production by 2029.
Growth in Defence Exports
India’s defence exports have also increased over the past decade, rising from ₹686 crore in FY 2013-14 to ₹21,083 crore in FY 2023-24. The Ministry attributes this growth to changes in export policies and initiatives to improve the ease of doing business.
Key exports include bulletproof jackets, Chetak helicopters, lightweight torpedoes, and fast interceptor boats, with significant markets in the United States, France, and Armenia. With a target to further increase defence exports to ₹50,000 crore by 2029, India aims to strengthen its role as a supplier in the global defence sector.
The Ministry reports that exports grew by 32.5% from the previous financial year, increasing from ₹15,920 crore.
Government Support for Defence Production
A range of government initiatives has been implemented to support local defence manufacturing. A key change was the increase of the Foreign Direct Investment (FDI) limit in the defence sector to 74% through the Automatic Route and up to 100% through the Government Route.
As of February 2024, total FDI in the defence sector reached ₹5,077 crore, which Ministry officials consider an indicator of increasing foreign interest in India’s defence manufacturing.
The defence budget allocation for 2024-25 stands at ₹6,21,940.85 crore, with ₹1,05,518.43 crore (75%) of the Capital Acquisition Segment specifically earmarked for domestic procurement.
Additionally, the Ministry has issued five Positive Indigenisation Lists covering a total of 5,521 items, placing an embargo on their import to encourage local production.
The Innovations for Defence Excellence (iDEX) scheme has also been established to involve startups and MSMEs in defence manufacturing, while two defence industrial corridors have been set up in Uttar Pradesh and Tamil Nadu to support regional development.
Streamlined Licensing and Procurement Preferences
The Ministry has simplified the licensing process for defence production and extended licence validity, measures that are expected to encourage more private sector companies to enter the industry.
The Public Procurement (Preference to Make in India) Order 2017 prioritises domestic manufacturing in public procurement processes, offering additional opportunities for Indian industry, including MSMEs.
Additionally, the Ministry’s SRIJAN portal facilitates indigenisation, enabling companies to identify import substitutes in defence production. Defence research and development (R&D) has been opened to industry participation, encouraging collaboration and innovation in the sector.
Defence Manufacturing Strategy
Officials from the Ministry of Defence state that India’s focus on building its indigenous defence capabilities is part of a broader strategy to ensure the country can meet its security needs while contributing to economic growth.
