Forest Services
Overview of India’s Defence Export Growth in 2025-26
India’s defence exports reached Rs 38,424 crore in the financial year 2025-26, marking a 62.66% increase over the previous fiscal year, according to the Ministry of Defence (MoD) Annual Report 2025-26. This growth was driven by both Defence Public Sector Undertakings (DPSUs), which contributed 54.84% of exports with a 151% increase, and the private sector, which accounted for 45.16% with a 14% rise. India exported defence equipment to over 80 countries during this period, reflecting its expanding footprint in the global defence market.
This surge is emblematic of India’s strategic emphasis on self-reliance in defence manufacturing under the Defence Production Policy 2020 and the Defence Procurement Procedure (DPP) 2023, which collectively aim to boost indigenous production and exports. The increase also aligns with the broader policy thrusts of Make in India and Atmanirbhar Bharat Abhiyan.
UPSC Relevance
- GS Paper 3: Defence Production, Defence Exports, Economic Development, Foreign Trade Policy
- GS Paper 2: Union List - Defence (Article 246, Entry 54), Defence of India Act, 1962
- Essay: India’s defence manufacturing and its role in strategic autonomy and economic growth
Legal and Constitutional Framework Governing Defence Exports
Defence production and exports fall under the exclusive jurisdiction of the Union Government as per Article 246 and Entry 54 of List I (Union List) of the Seventh Schedule of the Constitution. The Defence of India Act, 1962 (Section 3) empowers the central government to regulate defence production and exports during peace and war.
Export of defence items is regulated under the Arms Act, 1959 and the Foreign Trade (Development and Regulation) Act, 1992, with the Directorate General of Foreign Trade (DGFT) overseeing licensing and compliance under the Foreign Trade Policy. The Defence Procurement Procedure (DPP) 2023 and Defence Production Policy 2020 provide policy guidelines to promote indigenisation and export facilitation.
Economic Dimensions of Defence Export Growth
The defence budget has increased from ₹2.53 lakh crore in 2013-14 to ₹6.81 lakh crore in 2025-26, reflecting the government’s prioritisation of defence modernisation and manufacturing capacity expansion (Union Budget 2025-26). India targets ₹3 lakh crore in defence production by 2029, as per the Defence Production Policy 2020.
- Defence exports in FY 2025-26: Rs 38,424 crore (62.66% increase over FY 2024-25)
- DPSUs’ contribution: 54.84% of exports, with 151% growth
- Private sector contribution: 45.16% of exports, with 14% growth
- Export destinations: Over 80 countries globally
The rise in exports reflects improved manufacturing capabilities, enhanced R&D outputs by agencies like the Defence Research and Development Organisation (DRDO), and increased participation of the private sector supported by the Defence Innovation Organisation (DIO).
Institutional Roles in Defence Export Expansion
- DPSUs: State-owned enterprises like HAL, BEL, and BDL are the backbone of India’s defence manufacturing and export ecosystem.
- DRDO: Leads indigenous technology development, critical for creating export-worthy products.
- Defence Innovation Organisation (DIO): Facilitates private sector involvement and start-ups through innovation challenges and funding.
- Ministry of Defence (MoD): Policy formulation, export regulation, and international defence cooperation.
- Directorate General of Foreign Trade (DGFT): Licensing and regulatory compliance for defence exports.
- Defence Export Promotion Council (DEPC): Promotes exports through trade fairs, buyer-seller meets, and market intelligence.
Comparative Analysis: India vs South Korea Defence Export Ecosystem
| Aspect | India | South Korea |
|---|---|---|
| Defence Exports (2025-26/2023) | Rs 38,424 crore (~$5.1 billion) | $7.8 billion (2023) |
| Growth Drivers | DPSUs & Private Sector collaboration, DPP 2023, Make in India | Integrated government-private sector policies via Defence Acquisition Program Administration (DAPA) |
| Technology Base | Growing indigenous R&D via DRDO but limited high-end products | Advanced indigenous platforms with strong R&D incentives |
| Regulatory Environment | Complex export licensing, multiple agencies involved | Streamlined export licensing and export-friendly policies |
| Export Markets | 80+ countries, focus on developing and friendly nations | Global markets including Middle East, Asia, and Europe |
Challenges in India’s Defence Export Ecosystem
- Technology Transfer Bottlenecks: Limited access to cutting-edge foreign technology restricts high-end product development.
- Product Portfolio: Reliance on mid-tier products; lack of globally competitive advanced weapon systems.
- Regulatory Complexity: Multiple clearances and lengthy export licensing delay market entry.
- Private Sector Constraints: MSMEs and startups face capital and certification challenges.
- Global Competition: Competing with countries like South Korea and Israel that have streamlined processes and strong innovation ecosystems.
Significance and Way Forward
- India’s 62.66% export growth reflects increasing global acceptance and improved manufacturing capabilities.
- Strengthening R&D collaboration between DRDO, DPSUs, and private industry is critical to develop advanced indigenous products.
- Regulatory reforms to simplify export licensing and reduce procedural delays will enhance competitiveness.
- Expanding export markets beyond traditional partners through strategic defence diplomacy will diversify revenue sources.
- Encouraging MSMEs and startups by providing financial incentives and technology incubation will broaden the industrial base.
- Aligning defence export policies with international standards will facilitate smoother technology transfers and joint ventures.
- Defence exports are regulated under the Foreign Trade (Development and Regulation) Act, 1992.
- Defence is a concurrent subject under the Indian Constitution.
- The Defence Procurement Procedure 2023 aims to promote indigenous defence production and exports.
Which of the above statements is/are correct?
- DPSUs contributed more than half of India’s defence exports in FY 2025-26.
- DPSUs showed higher export growth than the private sector in FY 2025-26.
- DPSUs are private companies operating under the Ministry of Defence.
Which of the above statements is/are correct?
What legal provisions govern India’s defence exports?
India’s defence exports are governed primarily by the Defence of India Act, 1962, the Arms Act, 1959, and the Foreign Trade (Development and Regulation) Act, 1992. The Directorate General of Foreign Trade (DGFT) regulates export licensing under the Foreign Trade Policy, while the Defence Procurement Procedure 2023 provides policy guidelines for indigenous production and exports.
What is the role of DPSUs in India’s defence exports?
DPSUs are government-owned enterprises responsible for manufacturing and exporting defence equipment. In FY 2025-26, they contributed 54.84% of India’s defence exports and recorded a 151% growth, making them the largest contributors to export expansion.
How has India’s defence budget evolved in recent years?
India’s defence budget increased from ₹2.53 lakh crore in 2013-14 to ₹6.81 lakh crore in 2025-26, reflecting enhanced allocation for modernisation, indigenous manufacturing, and export promotion.
Which institutions promote innovation in India’s defence sector?
The Defence Research and Development Organisation (DRDO) leads indigenous R&D, while the Defence Innovation Organisation (DIO) promotes private sector participation and start-ups through innovation challenges and funding.
What challenges does India face in increasing its defence exports?
India faces challenges such as technology transfer bottlenecks, limited high-end indigenous products, complex regulatory approvals, and competition from countries with streamlined export policies like South Korea and Israel.
About LearnPro Editorial Standards
LearnPro editorial content is researched and reviewed by subject matter experts with backgrounds in civil services preparation. Our articles draw from official government sources, NCERT textbooks, standard reference materials, and reputed publications including The Hindu, Indian Express, and PIB.
Content is regularly updated to reflect the latest syllabus changes, exam patterns, and current developments. For corrections or feedback, contact us at admin@learnpro.in.