Hitting a major milestone for the aerospace and defence industry, PM Modi inaugurated the C-295 transport aircraft manufacturing facility at the TATA Advanced Systems Limited facility in Gujarat

India’s defence manufacturing sector is undergoing a dramatic transformation, marked by surging domestic production, rapidly rising exports, and ambitious partnerships with international leaders.

The sector’s momentum, highlighted by recent military operations and major deals, signals a new era where Indian firms are poised to compete on the global stage—but significant hurdles remain.

India’s indigenous defence manufacturing ecosystem has gained unprecedented confidence, as demonstrated by Operation Sindoor and the subsequent capital expenditure announcements by leading firms like Bharat Forge.

Bharat Forge’s new manufacturing facility and its exports of advanced artillery systems underscore the sector’s growing technological prowess and export ambitions. The private sector, once a minor player, now drives innovation and delivers cutting-edge systems for modern warfare, with companies such as Tata Advanced Systems, L&T, and Adani Group expanding their portfolios and securing major contracts.

A landmark development is Tata Advanced Systems’ agreement with Dassault Aviation to manufacture Rafale fighter jet fuselages in Hyderabad. This marks the first time Rafale fuselages will be produced outside France, positioning India as a key player in the global aerospace supply chain and boosting its technological capabilities. Such partnerships not only strengthen India’s manufacturing base but also signal to other global giants the potential of Indian firms as serious collaborators.

India’s push for self-reliance, through initiatives like Make in India and Atmanirbhar Bharat, has yielded tangible results. Indigenous defence production grew by 174% from FY15 to FY24, reaching over ₹1.27 lakh crore, while defence exports soared 34-fold in a decade to ₹23,662 crore in FY25.

The government’s target of ₹50,000 crore in exports by 2029 reflects rising confidence in the sector’s global competitiveness. Private firms now account for about 65% of defence exports, supplying advanced products to nearly 100 countries.

The government has played a pivotal role in this growth, revising procurement policies to favour private sector participation, encouraging competitive bidding, and reserving contracts for MSMEs. The Defence Acquisition Procedure and the opening up of projects like the advanced medium combat aircraft (AMCA) to private bidders reflect a shift towards a more dynamic and inclusive ecosystem.

Research and development, led by DRDO and supported by new industry-academia collaborations, is central to this evolution. The establishment of 15 Centres of Excellence at premier institutions and the Technology Development Fund have fostered partnerships for indigenous technology development, though both government and private R&D spending must rise significantly to close critical technology gaps and keep pace with the changing nature of warfare.

Despite these advances, complete indigenisation remains elusive. India continues to depend on imports for critical technologies and components, such as propulsion systems and rare earth minerals, due to global supply chain realities and limited willingness of foreign partners to transfer sensitive technologies. Even with local manufacturing of major systems, certain high-end components will likely remain imported, as seen in the GE-HAL jet engine partnership.

Indian defence PSUs like Hindustan Aeronautics and Bharat Electronics have gained global stature, ranking among the world’s top 100 arms producers. Major private conglomerates are scaling up, with expectations that India could achieve 80-85% indigenisation by 2035.

However, challenges persist: the sector’s monopsony nature (with the government as the primary buyer), irregular order flows, export licensing delays, skilled labour shortages, and the need for robust cybersecurity frameworks all pose significant obstacles to scaling up and sustaining global competitiveness.

India’s defence firms are rapidly closing the gap with global giants, leveraging policy support, technological innovation, and growing export markets. While they are increasingly seen as credible players—both as suppliers and as partners in high-tech collaborations—overcoming persistent challenges in R&D, supply chain independence, and workforce development will determine whether they can truly rival the established leaders of the global defence industry.

Based On Business Today Report