Forest Services
Overview of India’s Defence Export Growth in FY 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 year’s Rs 23,637 crore, according to the Ministry of Defence Annual Report 2026. This surge reflects the combined efforts of Defence Public Sector Undertakings (DPSUs) and private sector firms, exporting defence equipment to over 80 countries globally. The Defence Public Sector Undertakings accounted for 54.84% of exports with a remarkable 151% growth, while the private sector contributed 45.16% with a 14% increase. This milestone underscores India’s rising stature as a competitive defence manufacturing hub.
UPSC Relevance
- GS Paper 3: Defence Production, Defence Exports, Economic Development
- GS Paper 2: Role of Ministry of Defence, Institutional Framework
- Essay: India’s Strategic Autonomy and Defence Indigenisation
Legal and Institutional Framework Governing Defence Exports
Defence exports in India operate under a robust legal and policy framework. The Defence Production Policy 2020 and Defence Procurement Procedure (DPP) 2023 provide the primary guidelines for production and export. The Ministry of Defence Act, 1950 establishes the institutional roles of the MoD and its agencies. Article 246 of the Constitution places defence under the Union List, centralizing legislative powers. The Arms Act, 1959 regulates arms exports, with export licensing managed by the Directorate General of Foreign Trade (DGFT). Compliance with international agreements such as the Wassenaar Arrangement and the Arms Export Control Act ensures adherence to global norms.
- Ministry of Defence (MoD): Policy formulation, export regulation, and oversight.
- Defence Public Sector Undertakings (DPSUs): Manufacture and export of defence equipment.
- Defence Research and Development Organisation (DRDO): Research, development, and innovation in defence technologies.
- Directorate General of Foreign Trade (DGFT): Export licensing and regulatory compliance.
- Defence Export Promotion Council (DEPC): Facilitation and promotion of defence exports.
Economic Dimensions of the Defence Export Surge
The defence export growth coincides with a significant increase in India’s defence budget, which rose from ₹2.53 lakh crore in 2013-14 to ₹6.81 lakh crore in 2025-26 (Economic Survey 2026). The government targets ₹3 lakh crore in defence production by 2029, aiming to transform India into a global manufacturing hub. DPSUs’ export growth of 151% indicates enhanced capacity and competitiveness, while the private sector’s 14% growth reflects gradual integration into global supply chains. The export diversification to over 80 countries signals expanding market acceptance.
| Parameter | FY 2024-25 | FY 2025-26 | Growth Rate (%) |
|---|---|---|---|
| Total Defence Exports (Rs crore) | 23,637 | 38,424 | 62.66 |
| DPSUs Export Contribution (%) | ~40 | 54.84 | 151 (growth in value) |
| Private Sector Export Contribution (%) | ~60 | 45.16 | 14 (growth in value) |
| Defence Budget (₹ lakh crore) | ~5.5 (2020-21) | 6.81 | ~24 (over 5 years) |
Strategic Rationale Behind Defence Indigenisation and Export Promotion
India’s defence indigenisation reforms aim to reduce reliance on foreign suppliers, enhancing strategic autonomy amid complex geopolitical challenges, particularly in the Indian Ocean Region. Modernisation addresses capability gaps across the Army, Navy, and Air Force by replacing ageing platforms. Indigenous production lowers the import bill, reduces foreign exchange outflow, and stimulates economic efficiency. It also fosters innovation and growth within DPSUs, MSMEs, and private industry, shortening procurement cycles and improving operational readiness.
- Strategic Autonomy: Mitigates vulnerabilities from geopolitical tensions and supply disruptions.
- Capability Enhancement: Supports modernisation of defence forces to meet emerging threats.
- Economic Benefits: Reduces import dependency and nurtures domestic defence industrial base.
- Innovation and Growth: Encourages R&D and private sector participation.
- Operational Efficiency: Faster procurement and maintenance cycles through domestic sourcing.
Comparative Analysis: India, Russia, and South Korea
While India’s defence exports are growing rapidly, they remain smaller in scale compared to Russia, the world’s second-largest arms exporter with $15 billion in 2024 (SIPRI). India’s export value of approximately $5 billion (Rs 38,424 crore) is expanding but still trails Russia’s dominant position. India’s approach, emphasizing indigenisation and integration of private sector innovation, parallels South Korea’s strategy, which grew exports from $1 billion in the early 2000s to over $7 billion in 2024 by leveraging government support and private sector dynamism.
| Aspect | India | Russia | South Korea |
|---|---|---|---|
| Defence Exports (2024-25) | ~$5 billion | $15 billion | $7 billion |
| Growth Rate (Recent Year) | 62.66% | Stable/Moderate | High, sustained growth |
| Export Markets | 80+ countries | Global (traditional clients) | Global, focused on Asia & US allies |
| Private Sector Role | Growing but limited | State-dominated | Strong private sector integration |
| Technology Transfer | Challenged by delays | State-controlled | Streamlined and proactive |
Challenges in India’s Defence Export Ecosystem
Despite robust growth, India’s defence export ecosystem faces critical bottlenecks. Technology transfer delays impede the development of high-end indigenous platforms. The private sector’s potential is constrained by limited R&D outputs and export licensing bottlenecks under the DGFT. These challenges slow scaling compared to South Korea and Israel, which have streamlined export controls and stronger private-public linkages. Addressing these gaps is vital for sustaining export momentum.
- Delays in technology transfer and indigenous R&D outputs.
- Complex export licensing and regulatory procedures under DGFT.
- Limited private sector integration in high-value defence production.
- Need for enhanced collaboration between DRDO, DPSUs, and private firms.
Significance and Way Forward
The 62.66% increase in defence exports signals India’s emergence as a credible global defence supplier, reinforcing strategic autonomy and economic growth. To sustain this trajectory, reforms must focus on expediting technology transfers, simplifying export licensing, and fostering private sector innovation. Strengthening institutional coordination among MoD, DRDO, DPSUs, and DGFT will enhance export competitiveness. Achieving the ₹3 lakh crore production target by 2029 requires a calibrated balance of policy support, infrastructure investment, and global market integration.
- Streamline export licensing to reduce bureaucratic delays.
- Enhance R&D collaboration between DRDO and private industry.
- Promote MSMEs and startups in defence manufacturing.
- Expand diplomatic efforts to open new export markets.
- Invest in advanced technologies for next-generation defence products.
- The Defence Production Policy 2020 governs defence exports and production.
- The Directorate General of Foreign Trade (DGFT) oversees export licensing of defence equipment.
- The Arms Export Control Act is an Indian legislation regulating arms exports.
Which of the above statements is/are correct?
- DPSUs contributed over 50% of defence exports with more than 150% growth.
- Private sector defence exports grew at a higher rate than DPSUs.
- India exported defence equipment to more than 80 countries.
Which of the above statements is/are correct?
Jharkhand & JPSC Relevance
- JPSC Paper: Paper 2 - Economic Development & Industrial Growth
- Jharkhand Angle: Presence of defence manufacturing units in Jharkhand’s industrial corridors can benefit from the export push, creating employment and skill development opportunities.
- Mains Pointer: Frame answers highlighting how Jharkhand’s industrial ecosystem can integrate with national defence manufacturing policies to boost regional development.
What legal provisions govern India’s defence exports?
India’s defence exports are regulated under the Defence Production Policy 2020, Defence Procurement Procedure 2023, and the Arms Act, 1959. Export licensing is managed by the Directorate General of Foreign Trade (DGFT), with compliance to international agreements like the Wassenaar Arrangement.
Which institutions are key to India’s defence export ecosystem?
The Ministry of Defence formulates policy; DPSUs manufacture and export equipment; DRDO leads R&D; DGFT regulates export licensing; and the Defence Export Promotion Council facilitates export promotion.
What was the contribution of DPSUs to defence exports in FY 2025-26?
DPSUs contributed 54.84% of India’s defence exports in FY 2025-26, with a growth rate of 151% compared to the previous year, highlighting their expanding role in export markets.
How does India’s defence export scale compare with Russia and South Korea?
India’s defence exports (~$5 billion) are growing rapidly but remain smaller than Russia’s $15 billion exports. India’s strategy resembles South Korea’s, which grew from $1 billion to $7 billion by integrating private sector innovation and government support.
What are the main challenges facing India’s defence export growth?
Challenges include delays in technology transfer, limited high-end indigenous R&D, complex export licensing by DGFT, and insufficient private sector integration, which constrain scaling compared to competitors.