India’s indigenous defence manufacturing recorded its highest growth trajectory in a decade, touching Rs 1,27,434 crore in FY 2023-24, according to official figures released by the Ministry of Defence. The latest numbers mark a nearly threefold rise from Rs 46,429 crore in 2014-15, reflecting sustained policy interventions, higher budget allocations and a steady push toward self-reliance in the defence sector.
Officials attribute the growth to a combination of long-term reforms and increasing participation from public and private industry. Over the last ten years, defence allocations have expanded significantly, from Rs 2.53 lakh crore in 2013-14 to Rs 6.81 lakh crore in 2025-26, signalling a strategic intent to strengthen military infrastructure and reduce dependency on imports.
While Defence Public Sector Undertakings (DPSUs) and other PSUs continued to dominate production with a 77 per cent share in FY 2024-25, the private sector’s contribution rose to 23 per cent, up from 21 per cent in the previous fiscal. The government has identified the rising private sector participation as a sign of a maturing ecosystem, supported by easier licensing, liberalised FDI norms, and reforms aimed at streamlining procurement.
Reforms Address Long-standing Bottlenecks
Before the onset of major reforms under the current government, India’s defence industry struggled with slow procurement cycles, limited technology access and heavy reliance on foreign equipment. Exports were minimal, only Rs 686 crore in FY 2013-14, keeping India largely on the list of top global importers.
A series of measures, including the draft Defence Production and Export Promotion Policy (DPEPP), sought to address these structural faults. The policy framework emphasised domestic research and development, intellectual property creation, industry-academia partnerships and a stronger role for MSMEs in defence production. The government has set an ambitious target to raise domestic defence manufacturing to Rs 3 lakh crore and exports to Rs 50,000 crore by 2029.
Procurement Reforms: DAP 2020 And DPM 2025
Two major procurement frameworks, DAP 2020 for capital acquisition and the newly launched DPM 2025 for revenue procurement, are central to the government’s strategy for improving efficiency and transparency.
DAP 2020 introduced an “Indian First” acquisition hierarchy, prioritising categories like Buy (Indian-IDDM), which ensures that equipment is both indigenously designed and manufactured. The policy also encourages adoption of technologies such as artificial intelligence, robotics, cyber systems and space-based assets.
Industry participation has been boosted through initiatives such as Innovations for Defence Excellence (iDEX), which connects start-ups and MSMEs with the armed forces. Digital integration and simplified approval processes have been credited with reducing delays that previously hampered procurement.
DPM 2025, which came into effect on 1 November 2025, aims to streamline revenue procurement and bring uniformity across the armed forces. Key features include easier processes for domestic suppliers, reduced liquidated damages for indigenisation-related projects, guaranteed orders for indigenous products for up to five years and the removal of certain legacy approvals.
Together, the two frameworks establish a more coordinated procurement ecosystem that supports faster decision-making, promotes local production and enhances operational readiness.
Domestic Manufacturing And Industrial Corridors
India’s defence production landscape has expanded rapidly, with FY 2024-25 recording output worth Rs 1.54 lakh crore, the highest ever. Targets for the current fiscal stand at Rs 1.75 lakh crore, in line with broader plans to reach Rs 3 lakh crore by 2029.
The Uttar Pradesh and Tamil Nadu Defence Industrial Corridors have emerged as major hubs in this transformation. The two corridors have attracted over Rs 9,145 crore in investments and have signed 289 MoUs representing more than Rs 66,000 crore in potential future opportunities.
The Defence Research and Development Organisation (DRDO) continues to support this ecosystem through a mix of technology development, partnerships and funding. A Rs 500 crore corpus has been approved to support deep-tech projects under the Technology Development Fund. Meanwhile, 15 Defence Industry-Academia Centres of Excellence now link research institutions directly with industry.
The restructuring of the Ordnance Factory Board into seven specialised defence companies has also been flagged as a major effort to enhance efficiency and accountability in the public sector.
Private companies and MSMEs have taken on a bigger role in recent years, supported by easier licensing procedures, corridor-based incentives and a more open procurement environment. According to government data, nearly 16,000 MSMEs are now part of the defence supply chain.
Rising Defence Acquisitions And Indigenous Approvals
The Defence Acquisition Council (DAC) has progressively increased the share of indigenous procurement. In the Union Budget 2024-25, capital allocation for defence services touched Rs 1.72 lakh crore, marking a 20.33 per cent increase over actual expenditure in FY 2022-23.
During 2025, the DAC approved several major indigenous projects, including tank engines, torpedoes, airborne surveillance platforms, missile systems, autonomous vessels and radars. Recent clearances have focused heavily on the Buy (Indian-IDDM) category.
In 2024-25, a record 193 procurement contracts worth Rs 2,09,050 crore were signed, with 177 of these awarded to the domestic industry. Officials say the trend reflects a decisive shift toward boosting self-reliance while meeting the capability needs of the armed forces.
Exports Gain Momentum Amid Policy Simplification
India’s defence exports rose to Rs 23,622 crore in FY 2024-25, registering a 12.04 per cent increase over the previous year. The private sector contributed Rs 15,233 crore, while DPSUs recorded Rs 8,389 crore, a significant rise compared to FY 2023-24.
A digital platform for export authorisations, simplified standard operating procedures and Open General Export Licences have all contributed to faster approvals and a wider export footprint. India exported a range of products, including ammunition, bulletproof jackets, interceptor boats, helicopters, radars and lightweight torpedoes, to nearly 80 countries.
Officials say that defence exports now serve a wider diplomatic purpose, enhancing strategic ties, interoperability and long-term partnerships with friendly nations.
Outlook
With record production numbers, deeper industry participation and an expanding export footprint, officials believe India’s defence manufacturing sector is well-positioned for further growth. As policy reforms continue to take shape and procurement frameworks become more integrated, the government expects the sector to play a central role in India’s economic and strategic aspirations over the coming years. |
