Make in India in Defence Sector

Why India's ₹1.51 Lakh Crore Defence Production Target Signals Progress, But Not Transformation

In December 2025, India’s defence production value stood at an impressive ₹1.51 lakh crore, up from just ₹46,000 crore a decade earlier. This marks a turning point—for a nation that once imported 65-70% of its defence equipment, domestic manufacturing now accounts for 65% of the total share. Yet, behind these figures are deeper questions about the structural tensions that continue to impede the “Make in India” vision for defence.

A Financial Base, but Are Allocations Sustainable?

Central to the rise of India’s indigenous defence sector is policy scaffolding like the Defence Acquisition Procedure (DAP) 2020, which mandates priority for the ‘Buy (Indian-IDDM)’ category in procurement. The defence budget reflects the government's intent too, soaring from ₹2.53 lakh crore in 2013–14 to ₹6.81 lakh crore in 2025–26. However, merely channeling budget growth into domestic production does not guarantee sustainable modernization.

The inclusion of Innovations for Defence Excellence (iDEX), aimed at startups and MSMEs, and the ambitious Defence Testing Infrastructure Scheme (DTIS)—which has approved seven testing facilities for areas like unmanned aerial systems and electronic warfare—are intended to bridge capability gaps. While these frameworks encourage technological sovereignty, their implementation reveals a fragmentation of effort: funding delays under Make-I procedures, bureaucratic sluggishness in greenfield projects under DTIS, and an uneven adoption rate of innovations.

India’s export narrative showcases undeniable growth—from ₹686 crore in 2013–14 to ₹23,622 crore in 2024–25—but is it enough to call India a global defence exporter? Despite high-profile success stories like ‘Made in Bihar’ boots for the Russian Army and lightweight torpedoes heading to Armenia, India’s capability to export complex systems remains limited. Few big-ticket exports within aerospace or missile technology compete with established producers like the US, France, or Russia.

Centre-States Coordination: A Policy Blind Spot

A seldom-discussed issue in India’s defence sector lies in centre-state friction. While national policies focus on enabling indigenous capabilities, industrial clusters critical to defence production—such as Bengaluru’s aerospace complex—depend on state government buy-ins for infrastructure and ancillary industrial support. The irony here is that states with weaker manufacturing ecosystems (e.g., Bihar or Uttar Pradesh) receive disproportionately higher political focus, diluting efficiency.

MSMEs, touted as the bedrock for indigenisation, still suffer from labyrinthine licensing processes, particularly when transitioning from small-scale contracts to high-volume defence supply lines. Rationalisation of industrial licences for defence products has extended validity to 15 years, but this doesn't address systemic hurdles in funding access for these smaller players.

France's Model: An Institutional Contrast

India could learn from France’s defence sector, where state-led entities like Dassault Aviation integrate closely with private firms in aerospace, naval, and land equipment production. The French model highlights the value of strong public-private partnerships, complemented by tight national control over critical technologies. By comparison, India’s Strategic Partnership Model struggles to foster technology transfer between public sector units (DPSUs) and global Original Equipment Manufacturers (OEMs), often due to misaligned incentives.

For instance, France ensures high domestic customization without compromising export capabilities, as seen in the Rafale aircraft program—adaptable for a range of international buyers. India’s equivalent efforts, such as advanced fighter aircraft development (HAL’s Tejas), remain over-reliant on government support with limited international traction.

The Structural Limits of “Self-Reliance”

To paint this ambition of self-reliance with evenly bright strokes would be premature. Several limitations remain:

• Bureaucratic inertia: DAP 2020 optimistically sets indigenisation priorities, but procurement timeframes for large-scale projects—like naval frigates and advanced combat systems—often overshoot sharply.
• Technology gaps: Despite liberalized FDI policies (74% under automatic route), big defence players hesitate to transfer critical tech unless backed by specific geostrategic alignments.
• Political economy bottlenecks: Major defence manufacturers domiciled in politically influential states receive favorable treatment, skewing resource allocations away from national priorities.

The distance between intent and execution exacerbates alongside geopolitical inconsistencies. Dependence on foreign-origin equipment is still significant, especially in advanced domains such as stealth technology and integrated missile systems.

What Will Success Actually Look Like?

The metric for Make in India’s success in defence cannot simply be production figures or exports. Genuine transformation requires:

• Technological autonomy measured through reductions in critical imports.
• State-policy cohesion delivering industrial clusters that integrate MSMEs with defence giants uniformly across India.
• A functional Strategic Partnership Model where private industries and global OEMs drive innovation rather than compliance.

It’s too early to declare whether India’s pursuit of ₹3 lakh crore defence production by 2029 will succeed, but the focus must shift from announcements to institutional reforms—streamlined procurement, faster project approvals, and genuinely competitive platforms.

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