India’s Defence Exports Increased by 62.66% in 2025-26

Syllabus: GS3/Defence

Context

• Defence exports have reached an all-time high of Rs 38,424 crore in the financial year 2025-26, marking an increase of 62.66% over the previous fiscal year.

Major Highlights

• The Defence Public Sector Undertakings (DPSUs) and the private sector have contributed 54.84% and 45.16% respectively.
• The DPSUs’ exports surged by 151% compared to the previous year while private firms recorded an increase of 14%.
• The sharp rise highlights the increasing global acceptance of Indian made defence products and the sector’s growing integration with the international supply chains.

• India is exporting defence equipment to more than 80 countries as of FY 2025-26.
• Defence Budget: The defence budget has seen a steady rise, growing from ₹2.53 lakh crore in 2013–14 to ₹6.81 lakh crore in 2025–26.
• India targets ₹3 lakh crore in defence production by 2029, reinforcing its position as a global defence manufacturing hub.

Need for Defence Indigenisation Reforms

• Strategic Autonomy & National Security: Reduces dependence on foreign suppliers, especially during crises and geopolitical tensions.
• Addressing Capability Gaps: India faces complex security challenges across borders and in the Indian Ocean Region (IOR). Modernisation is required to replace ageing platforms in the Army, Navy, and Air Force.
• Reducing Import Bill & Promoting Economic Efficiency: India is among the world’s largest arms importers, indigenous production lowers costs in the long run, reduces foreign exchange outflow, and strengthens the domestic defence economy.
• Boosting Domestic Defence Industrial Base: Indigenisation stimulates innovation and growth of DPSUs, MSMEs, and private industry.
• Faster Procurement & Operational Readiness: Domestic manufacturing shortens procurement cycles and ensures timely delivery.
• Improved Customisation & Adaptability: Indigenous platforms can be tailored to Indian terrain (Himalayan high-altitudes, deserts, maritime zones) which allows continuous upgrades to meet evolving threat environments.
• Technology Sovereignty: Developing indigenous technologies ensures freedom in design, production, and future upgrades. It also prevents vulnerability due to sanctions, supply chain disruptions, or technology denials.

Defence Acquisition & Indigenisation Reforms

• DAP 2020 with Focus on Indian-IDDM: It gives the highest priority to the ‘Buy (Indian–Indigenously Designed, Developed and Manufactured)’ category to ensure that major defence purchases are made from Indian sources.
• Simplified ‘Make’ Procedure: Encourages Indian industry to design, develop, and manufacture defence products, reducing import dependence.
  • Under Make-I, the government funds up to 70% of development costs and reserves certain projects for MSMEs. 
  • The Make-II category (industry-funded) offers relaxed eligibility, minimal paperwork, and accepts proposals from industry or individuals. 
  • So far, 62 projects for the Army, Navy, and Air Force have received ‘Approval in Principle’.
• Liberalised FDI in Defence: Foreign Direct Investment limit raised to 74% via automatic route for new defence industrial licences, and up to 100% by government approval in cases involving access to advanced technology.
• Defence Industrial Corridors: Two corridors, Uttar Pradesh Defence Industrial Corridor (UPDIC) and Tamil Nadu Defence Industrial Corridor (TNDIC), are the lifelines of this transformation.
  • In 2025, they have attracted investments worth over ₹9,145 crore, with 289 MoUs signed.
• Defence Testing Infrastructure Scheme (DTIS): DTIS aims to boost indigenisation by providing financial assistance for setting up eight Greenfield testing and certification facilities in the aerospace and defence sector.
  • Seven test facilities are already approved in areas like unmanned aerial systems, electronic warfare, electro-optics, and communications.
• Boosting Innovation:iDEX & TDF Innovations for Defence Excellence (iDEX), launched in 2018, supports startups, MSMEs, academia, and innovators with grants and funding to develop technologies for defence and aerospace.
  • Technology Development Fund (TDF) Scheme also funds industries, especially Start-ups and MSMEs upto an amount of Rs. 10 Crore, for innovation, research and development of defence technologies.
• Strategic Partnership (SP) Model: Introduced in 2017 to create long-term partnerships between Indian companies and global Original Equipment Manufacturers (OEMs).
  • These partnerships focus on technology transfer and setting up manufacturing infrastructure in India.
• Indigenisation Portals: SRIJAN Portal (launched 2020) lists defence items previously imported, inviting industry to develop them locally.
• Ease of Doing Business in Defence: Defence products requiring industrial licences have been rationalised, and most parts/components no longer need a licence.
  • Industrial licence validity has been extended from 3 years to 15 years, with a possible 3-year extension, making investment planning easier.

Conclusion

• The combination of strategic policy interventions, increased domestic participation, and a focus on indigenous innovation has significantly strengthened the country’s defence capabilities. 
• With ambitious targets set for 2029, the nation is poised to further expand its global footprint, reinforcing its position as a dependable partner in the international defence market while enhancing national security.

Source: TH