India's defence manufacturing story has crossed an important milestone. The country's defence production touched a record Rs 1.78 lakh crore in FY26, rising 15.6% from Rs 1.54 lakh crore a year earlier and more than doubling from Rs 84,643 crore recorded in FY21. The growth becomes even more striking when viewed over a longer period. Indigenous defence production has nearly quadrupled from Rs 43,746 crore in 2013-14, reflecting a sustained policy push towards self-reliance under the Aatmanirbhar Bharat programme.
This manufacturing surge comes alongside the government's record defence budget of Rs 7.85 lakh crore for 2026-27, including Rs 2.19 lakh crore earmarked for military modernisation and capital acquisitions. The defence budget has more than tripled from Rs 2.53 lakh crore in 2013–14.
Public sector undertakings continue to dominate production, accounting for about 76% of output, but the private sector's role is expanding steadily. Private companies contributed nearly Rs 42,000 crore worth of production in FY26, raising their share to 24% from 22% a year earlier.
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The manufacturing expansion has also translated into record defence exports of Rs 38,424 crore. The numbers point to something larger than annual growth. India is no longer merely trying to reduce imports. It is gradually building a full-fledged defence-industrial ecosystem that combines state-owned giants, private conglomerates, startups and exporters into a manufacturing base that increasingly resembles the military-industrial complexes seen in major defence powers.
The end of the old monopoly
For decades after Independence, India's defence production remained overwhelmingly concentrated within government-controlled institutions. The ecosystem revolved around defence public sector undertakings, ordnance factories and laboratories. This model ensured strategic control but often struggled with delays, cost overruns and technological gaps. The result was a paradox. India maintained one of the world's largest armed forces but remained among the largest importers of military equipment.
The last decade has witnessed a deliberate attempt to change that equation. A series of procurement reforms, positive indigenisation lists, higher foreign investment limits, simplified licensing procedures and targeted support for domestic manufacturing have encouraged private participation. Defence procurement policy has increasingly shifted from simply buying equipment to nurturing local capability.
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The transformation is now visible in production figures. Defence output has risen from less than Rs 50,000 crore in the middle of the previous decade to nearly Rs 1.8 lakh crore today. Such growth would have been impossible without the emergence of a broader industrial base beyond traditional state-owned entities.
What is unfolding is not merely a manufacturing expansion. It is the gradual creation of an Indian defence-industrial complex where design, production, research, exports and supply chains increasingly reside within the country.
Private industry moves to the centre stage
The most significant shift is the growing confidence being placed in private industry. For much of India's history, the production of strategic military platforms remained almost exclusively within the public sector. That barrier is now being dismantled.
The proposed participation of Tata Advanced Systems, Larsen & Toubro and Bharat Forge in the Advanced Multirole Combat Aircraft programme is perhaps the clearest signal of this change. The AMCA is India's most ambitious fighter aircraft project and among the most technologically complex programmes ever undertaken by the country. If a private-sector-led consortium eventually manufactures India's fifth-generation fighter aircraft, it would represent a historic break from the traditional state-dominated model.
Private participation is no longer confined to supplying components. Indian conglomerates are increasingly involved in systems integration, aerospace manufacturing, artillery production, missile launch infrastructure, naval platforms and electronic warfare systems.
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Tata Advanced Systems has emerged as the most comprehensive private defence integrator, with capabilities spanning aircraft assembly, armoured vehicles, aerospace structures, and electronic systems. Its discussions to supply military hardware to African and European countries, and its existing production footprint in Morocco, underscore the outward-facing nature of India’s new defence industry. Larsen & Toubro has entrenched itself as a strategic manufacturer in naval systems, submarines, missile launch infrastructure, and heavy engineering, leveraging decades of experience in nuclear and critical infrastructure projects. Bharat Forge represents a different but equally important trajectory. By converting deep expertise in metallurgy and precision manufacturing into artillery systems, armoured platforms, and ammunition, it has demonstrated how traditional industrial strengths can be repurposed for defence at scale.
Alongside them, Adani Defence and Mahindra Defence have entered missile manufacturing, unmanned systems, and electronic warfare, with drones and loitering munitions emerging as particularly dynamic entry points.
The significance of this trend extends beyond production numbers. Private companies bring access to capital, managerial flexibility, global partnerships and a stronger appetite for innovation and risk-taking. Those characteristics are particularly important in modern defence manufacturing where technologies evolve rapidly and development cycles are expensive.
The rise of the defence startup economy
If the large industrial houses are becoming the pillars of India's defence manufacturing ecosystem, a new generation of startups and medium-sized firms is emerging as its innovation engine.
The Ukraine war and recent conflicts across West Asia have demonstrated that future warfare will increasingly be shaped by drones, autonomous systems, electronic warfare and artificial intelligence. These are precisely the areas where smaller firms can move faster than traditional manufacturers.
Companies such as ideaForge have already become significant suppliers of surveillance drones. NewSpace Research and Technologies has developed swarm drone technologies and autonomous combat systems. Sagar Defence Engineering is working on maritime autonomous platforms. Tonbo Imaging has built advanced electro-optical and battlefield surveillance systems. Firms such as Data Patterns, Astra Microwave and Apollo Micro Systems have established capabilities in sensors, radar electronics and mission-critical defence systems.
The government's Innovations for Defence Excellence (iDEX) initiative has played a major role in encouraging these companies. Startups are now able to work directly with the armed forces, receive prototype funding and secure procurement opportunities that were previously inaccessible.
The result is the emergence of an innovation ecosystem that increasingly resembles the defence startup clusters seen in countries such as Israel and the United States.
Drones, the next manufacturing revolution
No segment illustrates India's defence manufacturing transformation better than drones and loitering munitions. Modern warfare is rapidly shifting towards unmanned platforms. Drones are cheaper than traditional aircraft, can be produced in large numbers and can be adapted for surveillance, targeting, logistics and precision strikes. This creates an ideal environment for smaller manufacturers.
Companies that barely existed in defence discussions a few years ago are now producing sophisticated drone systems for military applications. Nibe Defence's new manufacturing facility in Shirdi illustrates the trend. Beyond artillery ammunition, the company plans to manufacture precision attack drones, loitering munitions and long-range strike systems.
This is important because drone manufacturing does not require the enormous industrial infrastructure associated with fighter aircraft or submarines. It lowers entry barriers and allows a much larger number of Indian firms to participate in defence production.
As artificial intelligence, autonomous navigation and sensor technologies mature, India's drone ecosystem could become one of the fastest-growing segments of the country's defence industry.
Exports become the growth multiplier
Domestic demand and a big indigenisation push created the foundation of India's defence manufacturing expansion. Now, exports are increasingly becoming the growth accelerator. India's defence exports reached a record Rs 38,424 crore in FY26. What is particularly notable is the growing role of private industry, which now accounts for nearly half of export value.
The export story is important because defence manufacturing economics improve dramatically when companies can access overseas markets. Larger production runs reduce costs, improve competitiveness and encourage investment in research and development.
Indian products are gradually finding acceptance across Asia, Africa and parts of Europe. Artillery systems, patrol vessels, radars, missiles, electronic systems and drones are attracting growing interest. The BrahMos missile has become the flagship export success. Following the Philippines, Vietnam has emerged as another customer. Indonesia is widely viewed as a potential future buyer while interest has also been reported from other Southeast Asian countries.
Each export order strengthens manufacturing capacity at home while simultaneously enhancing India's diplomatic influence abroad.
Europe could become the next big opportunity
One of the most significant developments on the horizon is India's growing strategic engagement with Europe. As Europe seeks to diversify defence supply chains and reduce excessive dependence on a handful of suppliers, Indian manufacturers could find new opportunities in co-development, component production and joint manufacturing arrangements.
The India-EU defence partnership could accelerate technology collaboration and integrate Indian companies into global supply chains. European firms already view India not merely as a market but increasingly as a manufacturing partner. This shift has strategic importance. Participation in European defence supply chains would expose Indian companies to higher technological standards, create export opportunities and encourage further investment in advanced manufacturing.
For a defence-industrial complex seeking long-term growth, Europe represents both a market and a technology partner.
America's strategic shift may create a new market
Geopolitical developments may also work in India's favour. The United States under President Donald Trump has placed a greater focus on burden-sharing and has appeared less willing than before to act as the primary security guarantor across every region. This perception is particularly significant in Southeast Asia where concerns about China's growing military presence continue to shape defence planning.
The US is naming the US Indo-Pacific Command (USINDOPACOM) back to US Pacific Command (USPACOM). The name change indicates America's gradual withdrawal from the role as a global security player, a sharp move away from the earlier pivot when it began using the name 'Indo-Pacific' as part of a policy to contain China.
The South China Sea rim countries facing uncertainty over long-term American commitments are increasingly investing in their own deterrent capabilities. This creates opportunities for suppliers that offer affordable, effective and politically acceptable military equipment.
India fits that profile. Unlike some traditional arms exporters, India combines competitive pricing with fewer geopolitical conditions. As countries such as Vietnam, Indonesia, the Philippines, Malaysia and Thailand modernise their militaries, Indian missiles, drones, radars and electronic systems could find expanding markets.
The possibility of a chain of Indian-origin defence systems across Southeast Asia would not only boost exports but also deepen India's strategic influence throughout the Indo-Pacific.
A self-sustaining military-industrial ecosystem
The most remarkable aspect of India's defence manufacturing rise is that multiple growth drivers are reinforcing one another. Indigenisation creates domestic demand. Domestic demand encourages investment. Investment improves technological capability. Better technology boosts exports. Exports generate scale. Scale lowers costs and attracts more private participation.
This self-reinforcing cycle is now visible across the sector. The public sector remains indispensable and will continue to anchor strategic programmes. Yet the future growth story will be written by a combination of large private corporations, specialised manufacturers, startups and exporters.
The government's target of making India a major defence manufacturing hub no longer appears aspirational. The foundations are already visible in the numbers. However, India's defence-industrial complex is still young compared with those of the US, China or Europe. But for the first time, it has acquired momentum, scale and strategic relevance simultaneously. What began as a drive for self-reliance is gradually evolving into something much larger -- the emergence of India as a significant defence manufacturing and exporting power.
