The Defence Sector in India
​
India's defence sector is one of the largest and most dynamic in the world, reflecting the country’s growing geopolitical significance and commitment to national security. With its robust defence budget, increasing focus on modernization, and government initiatives like ‘Make in India’ and ‘Atmanirbhar Bharat’ (self-reliant India), the sector presents significant opportunities for foreign players to engage and invest.
​​
India is the world’s third-largest military spender, with a defence budget of over $81 billion in 2023-24. The country has a vast and diverse defence force comprising the Army, Navy, Air Force, and specialized paramilitary forces. Despite having a strong domestic defence production base, India remains one of the largest importers of defence equipment, highlighting a gap between demand and domestic supply capabilities.
​​
The Indian government is actively working to bridge this gap by encouraging foreign investment, partnerships, and the transfer of technology. Defence procurement priorities include advanced weapons systems, modern fighter jets, submarines, helicopters, unmanned aerial vehicles (UAVs), cybersecurity solutions, and artificial intelligence-driven defence technologies.
​​
Opportunities​
​​
Collaborations and Joint Ventures
India’s defence sector encourages collaboration between foreign original equipment manufacturers (OEMs) and local companies under the strategic partnership (SP) model. This model facilitates the transfer of technology, joint development, and production of advanced defence systems in India. Foreign players can form joint ventures with Indian firms to cater to the growing demand for cutting-edge technology.
​​
Make in India Initiative
Under the ‘Make in India’ initiative, the government has been promoting indigenous manufacturing in the defence sector. This policy allows foreign companies to invest in the Indian defence market through 74% Foreign Direct Investment (FDI) via the automatic route and up to 100% FDI in specific cases requiring government approval. This is an excellent opportunity for global defence manufacturers to establish a foothold in India.
​​
Defense Production and Export Promotion Policy (DPEPP)
India’s DPEPP aims to achieve a turnover of $25 billion in defence manufacturing by 2025, including $5 billion in exports. To meet this goal, the government is focusing on enhancing domestic capabilities while inviting foreign participation in production, research, and development.
​
Modernization of Armed Forces
India’s modernization efforts include the acquisition of state-of-the-art weaponry, aircraft, and naval systems. For example, the Indian Air Force seeks advanced fighter jets, drones, and air defence systems. Similarly, the Indian Navy is focused on building a blue-water fleet with advanced submarines, frigates, and aircraft carriers. Foreign companies with expertise in these areas can play a significant role in fulfilling these requirements.
​
Technology Transfer and R&D
Foreign players can leverage opportunities to collaborate with India on research and development (R&D) projects. Areas like cybersecurity, artificial intelligence, robotics, and space technology are gaining prominence in the defence domain. Partnering with Indian firms on R&D can result in mutually beneficial technology transfers and innovation.
​
Offset Policy
India’s Defence Procurement Procedure (DPP) includes an offset policy that mandates foreign companies involved in large defense contracts to invest a percentage of the contract value in India. This requirement creates opportunities for foreign firms to establish local manufacturing units, form joint ventures, or invest in Indian defense-related R&D.
​
Infrastructure Development
With India’s increasing focus on border security and coastal defence, there is a growing demand for advanced surveillance systems, communication networks, and critical infrastructure. Foreign players specializing in these technologies can tap into this expanding market.
​
The defence sector in India is poised for significant growth, driven by modernization efforts, increased spending, and a strategic push for self-reliance. For foreign players, the combination of government support, lucrative opportunities in manufacturing and technology, and a growing demand for cutting-edge solutions makes India an attractive destination. By aligning with India’s goals of indigenization and innovation, global defence companies can play a pivotal role in shaping the future of the Indian defence industry.
​
​