India Germany Sign Pact to Shore Up Defence Industrial Cooperation

India and Germany Sign Defence Pact: A Critical Step or Mere Symbolism?

On January 13, 2026, India and Germany signed a Joint Declaration of Intent on Bilateral Defence Industrial Cooperation during the visit of German Chancellor Friedrich Merz. The pact aims to foster long-term collaboration in co-development, co-production, and technology partnerships between the two nations. This agreement, one of the 19 formalized during Merz’s two-day visit, marks an ambitious attempt to deepen defence ties amid growing geopolitical volatility. But grand announcements often conceal thorny questions of implementation.

Breaking the Pattern: A Strategic Pivot?

India’s defence partnerships have traditionally skewed towards countries like Russia, the United States, and Israel. Germany, while a key European player, has been an outlier. The 2026 pact signals Germany’s intent to enter India’s defence-industrial landscape with renewed vigour and echoes broader trends of diversifying away from traditional suppliers. But this pivot from sporadic multilateral military exercises (MILAN, PASSEX) to deeper co-production arrangements underscores a different ambition. Germany’s decision to engage in technology partnerships—likely high on manufacturing precision equipment and propulsion systems—could break new ground in defence collaboration.

Adding context to this shift, bilateral trade between India and Germany surpassed $50 billion in 2024, with Germany positioned as India’s largest trading partner within the European Union. Engaging deeper on defence seems a plausible extension of an already strong economic relationship. However, Germany’s domestic arms export policies—stringent and reform-resistant—pose a potential friction point.

Institutional Mechanics: Defence Cooperation Agreement Revisited

Defence collaboration between India and Germany operates under the Bilateral Defence Cooperation Agreement of 2006, which forms the legal framework for such endeavors. However, the agreement’s scope has remained underwhelming, with activity limited to policy dialogues and procedural exercises. The 2026 pact supersedes previous incremental engagements, promising mechanisms for co-development—a step away from India’s standard procurement-heavy partnerships with the West.

The pact also aligns with India’s push for greater indigenization under the Defence Acquisition Procedure 2020. Co-production aligns well with the procedural mandates of ‘Buy (Indian-IDDM)’ categories aimed at boosting manufacturing through indigenous or technologically co-developed projects. But whether Germany, with its historically cautious approach to arms exports, will fully commit to sharing cutting-edge technologies remains uncertain.

Revisiting the Data: Ambition Meets Reality

The defence pact is promising on paper, but data from India's defence offsets policy raises red flags. As of 2023, the Comptroller and Auditor General (CAG) reported that less than 60% of committed defence offset obligations had been fulfilled, often due to procedural delays and lack of operational prioritization. This does not bode well for new technology partnerships with Germany if similar gaps persist.

Furthermore, Germany’s defence exports tell an interesting tale. According to SIPRI, German arms exports in 2025 declined by 15%, largely due to domestic laws limiting weapons transfer to conflict zones or authoritarian regimes. While India does not fall into these categories, Germany’s labyrinthine export permissions might complicate faster project rollouts.

On the Indian side, dependence on imports endures. Despite significant “Make in India” rhetoric, imports account for 60-65% of India’s defence requirements as of 2023. For Germany to contribute meaningfully, it would need to enter high-value niches such as naval propulsion or advanced electronic warfare systems. Promises of co-producing advanced drones or sub-surface sonar systems, for example, must yield actionable projects soon to retain credibility.

The Uncomfortable Questions

Several aspects of this defence collaboration merit closer scrutiny:

• Export Policy Bottlenecks: Germany’s arms export laws might restrict access to critical technologies, reducing the pact to superficial cooperation. Will these regulatory hurdles find efficient resolution before bilateral patience runs thin?
• Funding Gaps: Neither government has specified dedicated funding allocations for the pact, raising doubts about the financial seriousness of long-term projects.
• State-Level Implementation: Defence production in India often suffers from disparities in state cooperation. Will states like Tamil Nadu or Uttar Pradesh, already vying to be magnets for investment, operationalize these manufacturing promises?

More broadly, how does this pact tie into a coherent European defence partnership strategy for India? Agreements with France and the UK have similarly promised big outcomes but struggled to overcome project bottlenecks and interagency competition within India.

Learning from Japan: The Indo-Pacific Angle

Germany’s growing presence in India’s defence-industrial roadmap mirrors Japan’s evolving partnership trajectory. Both countries emphasize rules-based international order in the Indo-Pacific, but operational differences remain stark. Japan’s focus on lightweight, versatile technologies at scale—including surveillance drones and maritime security tools—has been effective in its modest Indian collaborations. By contrast, Germany’s ambitions seem broader yet tangled in bureaucratic red tape.

Interestingly, Japan managed to align its military technology transfer policies with India’s requirements under bilateral frameworks like the Acquisition and Cross-Servicing Agreement (ACSA). Germany might do well to study Japan's pragmatic, less-publicized approach in this regard—targeting sharply defined niches rather than sprawling commitments.

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