India’s Defence Exports in 2025-26: Overview and Significance

India’s defence exports reached Rs 38,424 crore in FY 2025-26, marking a 62.66% increase over the previous fiscal year, according to the Ministry of Defence Annual Report 2026. Defence Public Sector Undertakings (DPSUs) accounted for 54.84% of exports with a 151% growth, while the private sector contributed 45.16% with a 14% increase. India exported defence equipment to over 80 countries, reflecting expanding global acceptance. This growth underscores the success of indigenisation and the Make in India initiative, positioning India as an emerging global defence manufacturing hub and enhancing strategic autonomy.

Legal and Constitutional Framework Governing Defence Exports

Defence production and exports in India are governed primarily by the Defence Production Act, 1950, which empowers the government to regulate defence manufacturing. The Arms Act, 1959 regulates arms exports, imposing licensing and control mechanisms. Export controls are also framed under the Foreign Trade (Development and Regulation) Act, 1992, with specific provisions for strategic goods. The Defence Procurement Procedure (DPP) 2023 provides guidelines for procurement and export facilitation. Constitutionally, Article 246 and Entry 54 of List I (Union List) empower Parliament to legislate on defence production and exports, centralising policy authority.

• Defence Production Act, 1950: Framework for licensing and production control.
• Arms Act, 1959: Regulates manufacture, sale, and export of arms.
• Foreign Trade Act, 1992: Governs export controls on strategic goods.
• DPP 2023: Streamlines procurement and export processes.
• Constitutional basis: Union List Entry 54 ensures central legislative competence.

Economic Dimensions of India’s Defence Export Growth

The defence export figure of Rs 38,424 crore in FY 2025-26 represents a 62.66% increase over FY 2024-25, reflecting robust sectoral growth. DPSUs drove export growth with a 151% surge, reflecting enhanced production capacity and export orientation. The private sector’s 14% growth indicates increasing but still limited participation. The defence budget has more than doubled from Rs 2.53 lakh crore in 2013-14 to Rs 6.81 lakh crore in 2025-26, enabling capital expenditure and R&D investments. India aims to achieve Rs 3 lakh crore in defence production by 2029, aligning with national goals to reduce import dependency and build a self-reliant defence industrial base.

• Rs 38,424 crore defence exports in FY 2025-26 (MoD Annual Report 2026)
• 62.66% year-on-year export growth
• DPSUs contributed 54.84% of exports with 151% growth
• Private sector’s share at 45.16% with 14% growth
• Defence budget rose from Rs 2.53 lakh crore (2013-14) to Rs 6.81 lakh crore (2025-26)
• Target: Rs 3 lakh crore defence production by 2029

Key Institutions Driving Defence Export Growth

Several institutions underpin India’s defence export ecosystem. DPSUs remain the backbone of manufacturing and exports, leveraging decades of experience and infrastructure. The Defence Research and Development Organisation (DRDO) provides critical R&D support, enabling indigenous technology development. The Defence India Corporation (DIC) facilitates private sector participation and joint ventures. The Ministry of Defence (MoD) formulates policy and regulates exports, with the Directorate General of Quality Assurance (DGQA) ensuring compliance with international standards. The Department for Promotion of Industry and Internal Trade (DPIIT) supports industrial growth and export promotion.

• DPSUs: Manufacturing and export leadership
• DRDO: Indigenous R&D and technology development
• DIC: Private sector facilitation
• MoD: Policy formulation and export regulation
• DGQA: Quality assurance for defence exports
• DPIIT: Industry promotion and export support

Comparative Analysis: India vs South Korea Defence Exports

South Korea’s defence exports grew from $1.5 billion in 2010 to $7 billion in 2025, driven by strong government-private collaboration and export-friendly policies under the Defence Acquisition Program Administration (DAPA). South Korea streamlined licensing, enhanced technology transfer, and integrated MSMEs effectively into the supply chain. India’s 62.66% export growth is significant but still trails South Korea’s scale and institutional maturity. Emulating South Korea’s model could address India’s export ecosystem gaps.

Challenges and Critical Gaps in India’s Defence Export Ecosystem

Despite recent growth, India’s defence export ecosystem faces structural challenges. Licensing procedures under the Arms Act, 1959 remain complex and time-consuming, deterring private exporters. Technology transfer agreements are limited, restricting access to cutting-edge technologies. MSMEs have inadequate integration into global supply chains, limiting scale and innovation. These gaps contrast with competitors like South Korea, which have streamlined export controls and robust R&D partnerships, enabling sustained export growth.

• Complex licensing under Arms Act, 1959
• Limited technology transfer agreements
• Insufficient MSME integration into supply chains
• Relatively low private sector export growth (14%)
• Need for enhanced quality certification and international standards compliance

Significance and Way Forward

The 62.66% increase in defence exports in 2025-26 confirms India’s growing stature as a defence manufacturing hub. Achieving the Rs 3 lakh crore production target by 2029 will require addressing export licensing bottlenecks, incentivising private sector innovation, and expanding technology transfer agreements. Strengthening MSME participation and aligning quality standards with global benchmarks will enhance competitiveness. Institutional reforms inspired by South Korea’s DAPA model could accelerate sustainable export growth, reinforcing strategic autonomy and reducing import dependency.

• Simplify export licensing and regulatory frameworks
• Expand technology transfer and joint development agreements
• Promote MSME integration into defence supply chains
• Enhance quality assurance and international certification
• Encourage private sector R&D and export orientation

Jharkhand & JPSC Relevance

• JPSC Paper: Paper 2 - Science & Technology (Defence Production), Paper 3 - Economic Development (Industrial Growth)
• Jharkhand Angle: Presence of defence manufacturing units and MSMEs in Jharkhand contribute to local employment and skill development.
• Mains Pointer: Highlight Jharkhand’s role in defence MSME supply chains and potential for industrial growth under Make in India.