Digital visualisation of AMCA Naval variant on the deck of INS Vikrant

India’s defence sector is experiencing a profound transformation, marked by a decisive policy shift that positions the private sector as a central driver of growth, innovation, and self-reliance.

Historically dominated by public sector undertakings (PSUs) and reliant on imports, the sector is now building a robust domestic industrial base, with private firms increasingly at the forefront of production and strategic innovation.

This transformation is catalysed by government policies that strategically integrate private companies into defence manufacturing and procurement. The Advanced Medium Combat Aircraft (AMCA) programme exemplifies this shift: for the first time, a high-value, strategically critical fighter aircraft project is being opened to competitive bidding, inviting private sector leadership in end-to-end platform development. This approach aims to combine the research strengths of the Defence Research and Development Organisation (DRDO) with the execution efficiency and scalability of private industry, addressing past challenges such as delays and cost overruns seen in DRDO-dominated projects like the Tejas fighter.

Over the past decade, the Ministry of Defence has reformed procurement processes to foster transparency, competition, and a level playing field for private firms. The Defence Acquisition Procedure (DAP) 2020, which replaced the Defence Procurement Procedure 2016, prioritises Indian vendors and encourages open competition while reducing reliance on single-vendor nominations. Initiatives such as iDEX (Innovations for Defence Excellence) and Samarthya are further accelerating technological advancements in areas like artificial intelligence, cyber warfare, and indigenous weapon systems.

The results of these reforms are evident: private sector participation in defence production has surged, with its share now accounting for approximately 21% of total output, valued at ₹32,000 crore. Major players—including Tata Advanced Systems, Bharat Forge, Larsen & Toubro, and Adani Defence—are supplying critical components, platforms, and subsystems to both the Indian armed forces and global original equipment manufacturers (OEMs). Start-up's are also making significant inroads, particularly in fields such as robotics, drones, surveillance, and AI-driven battlefield intelligence.

India’s defence exports have reached nearly ₹24,000 crore ($2.9 billion) in FY25, with private firms playing a pivotal role. Notable achievements include Tata Advanced Systems’ partnership with Airbus Spain to manufacture C-295 military transport aircraft at India’s first private aircraft factory, and Alpha Design Technologies’ collaboration with Israel’s Elbit Systems on advanced drone systems. The government’s ban on imported drones and the introduction of production-linked incentives have further boosted indigenous innovation and manufacturing.

Looking ahead, India aims to achieve ₹3 lakh crore in defence production by 2029—a target that hinges on sustained institutional support, streamlined processes, and enhanced industry-government collaboration. Timely project execution and predictable demand pipelines will empower private firms to invest in long-term capacity and research and development, reducing cost overruns and enhancing operational readiness. Incentivising private R&D through tax breaks and joint research initiatives will help build proprietary intellectual property, attract global buyers, and reduce strategic dependencies.

Crucially, greater private sector participation will generate powerful spill over effects across allied industries such as metallurgy, electronics, semiconductors, and advanced manufacturing, driving broader industrial modernisation and resilience. The shift towards competitive bidding, co-development models, and increased transparency signals a new era, where private companies are not just partners but leaders in making India a global defence manufacturing powerhouse.

By embedding private sector dynamism into the core of defence manufacturing, India is poised to convert defence reform into an engine for industrial resurgence and global leadership—transforming from a technology importer to an innovator with strategic autonomy and enhanced national security.

Agencies