Whalesbook
India's defence exports have transformed dramatically, jumping from ₹1,535 crore in FY17 to ₹38,400 crore by FY26. Projections, based on a Rubix Data Sciences report, aim for ₹50,000 crore by FY29. This growth is driven by strong government support and a booming private sector.
Government Drives Indigenous Production
The defence budget has nearly tripled since FY21 to ₹7.85 lakh crore by FY27, making it the largest ministry allocation. This investment supports a strategic shift towards manufacturing defence equipment in India. Government policies favour domestic production, with 92% of the Ministry of Defence's FY25 contracts (by volume) and 81% (by value) going to Indian companies. Today, about 65% of defence equipment is produced domestically, a significant change from heavy import reliance a decade ago.
Private Sector Fuels Export Growth
The private sector's role in defence production has grown, rising from 19% in FY17 to 23% by FY25. Significantly, private companies accounted for about 45% of defence exports in FY26. This ecosystem now includes 16,000 MSMEs in the supply chain and over 1,000 defence startups, which have attracted nearly $2 billion in funding since 2017.
Challenges Remain Despite Progress
Despite domestic advances, India remains the world's second-largest arms importer, holding an 8.2% share from 2021-2025. Gaps persist in critical high-end technologies like jet engines and advanced sensors. A lack of R&D investment and vulnerability to global supply chain issues also pose major challenges.
Future Steps for Defence Exports
To overcome these hurdles, India needs to accelerate R&D investment and foster deeper collaboration between industry and academia. Ongoing policy support is crucial to strengthen domestic capabilities in advanced technologies and maintain steady growth in defence exports.