India’s defence and aviation market is projected to reach $60 billion by 2033, with defence growth driven domestically through indigenisation programs while aviation remains import-dependent due to limited local manufacturing options.

This dual trajectory highlights India’s strategic push for self-reliance in defence and continued reliance on foreign suppliers for aviation.

India’s defence and aviation market is expected to expand to $60 billion by 2033. Defence will be domestically driven, supported by government initiatives such as the Defence Acquisition Procedure 2020 and positive indigenisation lists mandating high indigenous content.

Aviation, however, will remain largely import-driven due to the lack of sufficient domestic options in advanced aircraft manufacturing.

The defence sector has already demonstrated strong momentum. India’s defence budget allocation in FY2024 stood at ₹6.21 lakh crore, marking a 4.3 percent increase from the previous year and accounting for 13.04 percent of the Union Budget.

This rising expenditure underlines the government’s commitment to modernisation and self-reliance. Domestic manufacturers such as Bharat Electronics Limited, Hindustan Aeronautics Limited, and Bharat Dynamics Limited are positioned to benefit from this structural upcycle.

Indian defence exports have surged dramatically, growing fifty-fold over the past decade. The United States remains the largest destination, while Europe and Armenia are emerging as new markets.

The government has set a target of ₹500 billion in exports by FY2029, reflecting the growing competitiveness of indigenous platforms. Proven combat performance and easing export controls have further boosted India’s credibility in global defence markets.

Technological advancements are reshaping spending priorities. Drones are transforming warfare economics, with the global military drone market valued at $30 billion in 2024 and projected to reach $75 billion by 2029.

India is expected to spend $25–30 billion on drones and $4–5 billion on counter-drone systems over the next decade. This reflects the increasing importance of unmanned systems in modern combat.

Global military spending has risen sharply, from $600–700 billion in the 1990s to $2.7 trillion in 2024, with forecasts suggesting it could reach $6.6 trillion by 2035. India currently ranks as the fifth-largest military spender globally, with an annual expenditure of $84 billion.

Rising military budgets in neighbouring countries further underscore the urgency for India to accelerate its own modernisation programs.

Acceptance of Necessity approvals surged nearly tenfold between FY2021 and FY2026, implying ₹6.5–7 trillion in new orders during FY2027–29. Domestic procurement has already risen from 54 percent in FY2019 to over 70 percent, positioning Indian companies to benefit from geopolitical tensions and expanding export opportunities.

Financially, Indian defence firms trade at a premium compared to global peers, with a forward price-to-earnings multiple of 50X versus 28X globally. Revenue CAGR for Indian firms is estimated at 26 percent, compared to the global average of 11 percent.

Between FY2021 and FY2026, domestic manufacturers delivered a 25 percent revenue CAGR, while EBITDA margins expanded by 500 basis points to approximately 25 percent. Adjusted for lower R&D spending, the margin advantage narrows from 800 basis points to around 450 basis points but remains significant.

In contrast, the aviation sector continues to rely heavily on imports. India spends about 40 percent of its defence budget on capital acquisitions, with nearly 70 percent of aviation requirements met through imports.

The lack of advanced domestic aircraft manufacturing capabilities has kept aviation dependent on foreign suppliers. While initiatives such as the Make in India program and Production Linked Incentive schemes aim to boost local production, the gap in technology and infrastructure remains a challenge.

This dual trajectory highlights India’s evolving defence-industrial identity. Defence is steadily moving towards self-reliance and global competitiveness, while aviation remains constrained by import dependence.

The next decade will be critical in determining whether India can bridge this gap and achieve balanced growth across both sectors.

Agencies