India is preparing to launch a $234 million (₹1,998 crore) incentive program over three years to accelerate domestic drone manufacturing for both civil and military applications.

This follows a significant escalation in drone warfare during a four-day conflict with Pakistan in May 2025, which marked the first large-scale use of unmanned aerial vehicles (UAVs) by both countries.

The conflict exposed vulnerabilities in India’s drone capabilities and highlighted its dependence on imported components, particularly from China, while Pakistan’s drone fleet benefited from support by China and Turkey.

The new incentive scheme, led by the Ministry of Civil Aviation with support from the Defence Ministry, aims to:

Reduce reliance on imported drone components, especially those from China.

Boost indigenous manufacturing of drones, critical components, software, counter-drone systems, and related services.

Achieve at least 40% domestic production of key drone components by the end of fiscal year 2028 (April–March).

The program will offer financial incentives to manufacturers who source parts domestically, and the Small Industries Development Bank of India (SIDBI) will provide low-interest loans for working capital and R&D to support drone firms. This is a significant increase from the earlier ₹120 crore production-linked incentive (PLI) scheme launched in 2021, which struggled to stimulate sufficient investment and innovation among startups.

Currently, India bans the import of finished drones but not their components. The new scheme is designed to encourage local sourcing and manufacturing, aiming to energise a sector that already includes more than 600 drone manufacturing and associated companies.

The incentive program is part of a broader strategy to position India as a global player in defence technology, strengthen national security, and close capability gaps exposed during the recent conflict. The government is also considering further investments, with potential spending on unmanned aerial vehicles reaching up to $470 million over the next 12 to 24 months in a staggered approach.

Indian Defence Secretary Rajesh Kumar Singh emphasised that the lessons from the conflict underscore the urgent need to “double down on our indigenisation efforts to ensure that we build a large, effective, military drone manufacturing ecosystem”.

The initiative is expected to drive innovation, create new opportunities for Indian drone start-ups, and reduce strategic vulnerabilities in the face of growing regional drone arms competition.