Record Defence Export Growth in 2025-26: Facts and Figures

India’s defence exports reached an unprecedented Rs 38,424 crore in the fiscal year 2025-26, marking a 62.66% increase from Rs 23,645 crore in 2024-25, according to the Ministry of Defence (MoD) and reported by Indian Express (2026). This surge reflects India’s accelerated integration into the global defence market and its strategic push for self-reliance under the Defence Production Policy 2020 and the recently enacted Defence Production Act, 2024. The growth is underpinned by enhanced indigenous production capabilities and streamlined export licensing mechanisms managed by the Directorate General of Defence Export Controls (DGDE).

Legal and Institutional Framework Governing Defence Exports

India’s defence export regime operates under a robust legal framework combining constitutional provisions, sector-specific laws, and policy instruments. Article 246(1) of the Constitution places defence production and export under the Union List, centralizing legislative authority.

• Defence Production Policy 2020: Sets targets for self-reliance and export growth, emphasizing indigenization and private sector participation.
• Defence Procurement Procedure (DPP) 2023: Streamlines acquisition and export processes, encouraging Make in India initiatives.
• Defence Production Act, 2024: Newly enacted to simplify licensing and regulatory hurdles in defence exports.
• Arms Act, 1959: Regulates manufacture and export of arms with strict compliance requirements.
• Foreign Trade (Development and Regulation) Act, 1992 (Section 5): Provides export control authority to the government, including defence items.
• MoD Guidelines on Defence Exports: Operationalize policies and provide procedural clarity for exporters.

Economic Dimensions of India’s Defence Export Growth

The Rs 38,424 crore export figure constitutes approximately 1.2% of India’s total merchandise exports as per the Economic Survey 2025-26. This growth aligns with the Rs 6.5 lakh crore defence budget for 2025-26, where 15% was allocated to capital expenditure, directly boosting indigenous production and export capacity.

• India ranks among the top 10 global arms exporters according to the SIPRI 2025 report.
• Projected export target for 2026-27 is Rs 50,000 crore, reflecting sustained policy momentum.
• Public sector units like Hindustan Aeronautics Limited (HAL) remain dominant exporters, though private sector participation is gradually increasing.

Key Institutions Driving Defence Export Growth

The MoD formulates policy and oversees implementation, while the DRDO develops indigenous technologies critical for exportable defence products. The DGDE regulates export licensing and compliance. Public sector manufacturers such as HAL contribute significantly to export volumes.

• Ministry of Defence (MoD): Policy formulation, export promotion, and budget allocation.
• Defence Research and Development Organisation (DRDO): Indigenous R&D for export-ready systems.
• Directorate General of Defence Export Controls (DGDE): Licensing and regulatory oversight.
• Hindustan Aeronautics Limited (HAL): Major public sector exporter of aircraft and aerospace components.
• SIPRI: Provides independent data benchmarking India’s global standing.

Comparative Analysis: India vs South Korea Defence Exports

Critical Gaps in India’s Defence Export Ecosystem

Despite rapid export growth, India’s defence exports face structural challenges. The product portfolio remains narrow, with over-reliance on a few categories and public sector units. Private sector innovation and diversification lag behind competitors like South Korea and Israel, limiting market penetration and value addition.

• Limited diversification restricts access to emerging markets and technology segments.
• Heavy dependence on public sector units constrains agility and innovation.
• Export licensing and compliance, though improved, still pose bureaucratic delays.
• Global competition demands faster adoption of cutting-edge technologies and private sector integration.

Significance and Way Forward

The 62.66% increase in defence exports in 2025-26 signals India’s strategic shift towards self-reliance and global market integration. Sustaining this momentum requires addressing diversification and private sector participation gaps.

• Enhance private sector incentives and ease regulatory barriers to foster innovation.
• Expand exportable product categories, including advanced electronics and missile systems.
• Strengthen DRDO-industry collaboration for rapid technology commercialization.
• Streamline export licensing further under the Defence Production Act, 2024.
• Leverage international partnerships to access new markets and technologies.