Defence industry in India
One of the world's largest defence budgets and a government actively looking for foreign companies to help its industry grow.
Schedule a free consultationWith a defence budget approaching a $100 billion, India is one of the world’s most significant and fastest-evolving defence markets.
India’s defence industry spans a wide range of market segments, with ground vehicles holding the largest share of the market, driven by the country’s need to secure its extensive land borders. Other major segments include military aircraft, naval vessels, missiles and missile defence systems, submarines, artillery, rotorcraft, tactical communications, and electronic warfare systems.
Defence is a strategically vital sector for India’s economy. With a total defence budget of $93 billion for FY2025, India maintains one of the world’s largest military forces. Heightened security concerns stemming from territorial disputes with China and Pakistan have kept defence spending consistently high.
India is currently the world’s second-largest importer of major arms, accounting for around 8.3% of global arms imports in the 2020鈥�2024 period. However, imports have declined in recent years as domestic production capabilities have grown.
To reduce dependence on foreign suppliers, the government has introduced a series of ‘Make in India’ and Atmanirbhar Bharat (self-reliant India) initiatives for the defence industry. These include positive indigenisation lists covering hundreds of defence products that must now be sourced domestically, making India an increasingly attractive destination for defence manufacturing.
Snapshot of the defence industry in India
- India aims to achieve a total defence production value of $21 billion by 2026, as part of its Defence Production and Export Promotion Policy (DPEPP 2020).
- 25% of the Ministry of Defence’s R&D funds have been earmarked for research supporting the development of indigenous defence technologies.
- The overall R&D allocation to India’s Defence Research and Development Organisation reached $3.2 billion in FY2025-26, a 12.4% increase year-on-year.
- The Green Channel Status Policy (GCS) has been introduced to streamline private sector participation in defence production.
- Since 2020, FDI in the defence industry in India is permitted up to 74% through the automatic route and up to 100% through the government route.
- India’s defence exports have grown to a record $2.76 billion in FY2024-25, a more than tenfold increase over the past decade, with the government targeting $6 billion in exports by 2029.
The conclusion of the EU-India Free Trade Agreement in January 2026, alongside a landmark Security and Defence Partnership, has opened a new corridor for European companies in India’s defence industry. The partnership establishes a dedicated India-EU Defence Industry Forum, providing a structured platform for joint development, technology transfer, and supply chain collaboration between Indian and European firms.
For European manufacturers, lower tariffs on components, streamlined rules of origin, and greater regulatory alignment reduce the cost of producing in India, while the defence partnership provides a more formal and lower-risk framework for market entry. The agreements are expected to begin delivering tangible benefits from 2027, making this an important moment for European companies to assess and position their India strategy.
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Growth indicators of India's defence industry
- India currently has the world’s fifth-highest defence expenditure at $86.1 billion (FY2024), and has set a target of approximately $6 billion in defence exports annually by 2029.
- India enjoys a unique status as a Major Defence Partner of the United States, a formal designation that provides access to a wide range of sensitive military and dual-use technologies. This places India on par with America’s closest treaty allies in terms of defence trade.
- The Ministry of Defence has set a target of 70% self-sufficiency in arms by 2027, offering significant prospects for industry players.
- Defence exports have reached a record US$2.76 billion in FY2024鈥�25, a more than thirtyfold increase over the past decade, with India now exporting defence equipment to over 100 countries.
Interesting investment opportunities
- Modernisation of the armed forces
- Development of infrastructure
- Defence manufacturing 鈥� Designed, developed and manufactured in India is the new method of capital procurement.
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