India’s Defence Manufacturing Doubled in 5 years: Signals Rise of a New Military-Industrial Power

• Defence production reached about $18.74 billion in FY26, up 15.6% year-on-year.

• Output has nearly quadrupled since 2013–14.

• FY27 defence budget stands at roughly $82.63 billion.

• Exports climbed to around $4.04 billion.

• Private sector and startups are reshaping the ecosystem.

India’s defence manufacturing sector has reached a historic inflection point. In FY26, domestic defence production rose to ₹1.78 lakh crore—approximately $18.74 billion marking a 15.6% increase from the previous year’s ₹1.54 lakh crore (about $16.21 billion). The longer-term trajectory is even more striking: output has more than doubled from FY21 levels and expanded nearly fourfold from ₹43,746 crore (around $4.61 billion) recorded in 2013–14.

The milestone reflects more than incremental growth. It signals the steady maturation of India’s ambition to build a self-reliant defence-industrial base under the Aatmanirbhar Bharat initiative.

Budget Backing and Capital Push

The production surge coincides with India’s largest-ever defence allocation. The FY27 defence budget stands at ₹7.85 lakh crore—roughly $82.63 billion—with ₹2.19 lakh crore (about $23.05 billion) earmarked for capital acquisitions and modernisation. For perspective, the total defence outlay in 2013–14 was ₹2.53 lakh crore, or approximately $26.63 billion, underscoring the scale of expansion over the past decade.

Public sector undertakings (PSUs) still account for about 76% of total output, but private participation is rising steadily. Private firms generated nearly ₹42,000 crore (around $4.42 billion) in FY26, lifting their share to 24%, up from 22% a year earlier.

Exports Strengthen the Ecosystem

India’s defence exports reached a record ₹38,424 crore in FY26, equivalent to roughly $4.04 billion. These figures illustrate a broader transformation: the country is moving beyond import substitution toward constructing a comprehensive defence-industrial ecosystem. State-owned enterprises, private conglomerates, mid-sized firms and startups are now collectively forming a manufacturing base with growing global reach.

Breaking the State Monopoly

For decades, India’s defence production was concentrated within government-controlled entities, including defence PSUs and ordnance factories. While this structure ensured strategic oversight, it was frequently associated with project delays and technological gaps. Consequently, despite fielding one of the world’s largest armed forces, India remained a major arms importer.

Over the past decade, policy reforms have altered this trajectory. Procurement rules have been redesigned to promote indigenous manufacturing. “Positive indigenisation lists,” relaxed foreign investment limits, streamlined licensing processes and incentives for domestic production have expanded opportunities for private players.

Production data reflects this policy pivot. Output has grown from under ₹50,000 crore (about $5.26 billion) in the mid-2010s to nearly ₹1.8 lakh crore ($18.95 billion) today, demonstrating the impact of widening industrial participation.

Private Sector Steps Forward

Perhaps the most profound shift is the growing centrality of private industry. Companies such as Tata Advanced Systems, Larsen & Toubro and Bharat Forge are now deeply embedded in strategic defence projects.

The Advanced Multirole Combat Aircraft (AMCA) programme—a fifth-generation fighter initiative—marks a defining moment. If private industry ultimately leads its production, it would represent a historic departure from the traditional state-led manufacturing model.

Private firms are no longer confined to supplying components. They are increasingly engaged in full systems integration, aerospace manufacturing, artillery, naval platforms, missile infrastructure and electronic warfare.

Tata Advanced Systems has built capabilities spanning aircraft assembly, armoured vehicles and electronics, while also exploring overseas supply opportunities, including in Africa and Europe. Larsen & Toubro has strengthened its position in naval systems, submarines and missile launch platforms. Bharat Forge has leveraged its metallurgy expertise to scale artillery and armoured solutions.

Meanwhile, Adani Defence and Mahindra Defence have expanded into drones, missile systems and advanced electronics.

The Startup Advantage

Alongside industrial giants, a vibrant defence startup ecosystem is emerging as a key innovation driver. Modern conflicts—from Ukraine to West Asia—have demonstrated the growing importance of drones, autonomous systems and AI-powered battlefield tools.

Companies such as ideaForge are supplying surveillance drones, while NewSpace Research and Technologies is developing swarm drone systems. Sagar Defence Engineering is focused on maritime autonomy, and Tonbo Imaging has built advanced battlefield optics. Firms like Data Patterns, Astra Microwave and Apollo Micro Systems have strengthened India’s radar and sensor capabilities.

The government’s Innovations for Defence Excellence (iDEX) initiative has helped startups collaborate directly with the armed forces, accelerating prototype development and procurement access.

Drones Lead the Next Wave

Unmanned systems represent one of the most dynamic segments of India’s defence transformation. Compared with fighter jets or submarines, drones require significantly lower capital investment, allowing broader industry participation.

Nibe Defence’s new facility in Shirdi reflects this shift. In addition to ammunition, the company plans to manufacture precision drones and loitering munitions. As AI and autonomous navigation technologies mature, India’s drone industry could become one of the fastest-growing segments within defence manufacturing.

Exports as a Multiplier

Exports are emerging as a powerful growth catalyst. Nearly half of India’s defence export value now comes from private industry. Overseas demand improves economies of scale, lowers unit costs and incentivises research and development.

Indian artillery systems, patrol vessels, missiles, radars and drones are gaining traction across Asia and Africa. The BrahMos missile has become a flagship export, with the Philippines as a confirmed customer and Vietnam emerging as another buyer. Interest from Indonesia and other Southeast Asian nations continues to build.

Each export order not only enhances domestic production capacity but also strengthens India’s strategic influence abroad.

Europe: The Next Frontier

Europe’s evolving defence priorities may open new avenues for collaboration. As European nations diversify supply chains and seek new manufacturing partnerships, Indian firms could integrate into joint development projects and global production networks.

An expanded India-EU defence partnership could foster technology transfer, joint ventures and higher manufacturing standards. Participation in European supply chains would deepen India’s technological base while broadening export markets.

A Self-Reinforcing Cycle

India’s defence sector now benefits from a mutually reinforcing dynamic: domestic procurement fuels industrial investment; investment enhances technological sophistication; improved capabilities drive exports; exports create scale and competitiveness.

While public sector entities remain crucial for strategic programmes, future growth is likely to be shaped by an increasingly diversified mix of corporations, specialised manufacturers and startups.

India’s defence-industrial complex remains young compared with those of the United States, China or Europe. Yet for the first time, it combines scale, momentum and strategic alignment. What began as a drive for self-reliance is steadily evolving into a larger ambition—positioning India as a significant global defence manufacturing and exporting power.