India’s Defence Indigenization, From Committees to Capability
The Union budget for 2026-27 signals a consolidation of the Indian defence industry’s transition. Its allocation of ₹7.85 trillion to India’s ministry of defence—15.2% higher than in 2025-26 and 14.7% of total central government spending—is not a symbolic increase. It positions defence as a core component of state capacity rather than a discretionary outlay.
It is consonant with the Narendra Modi-led government’s vision of an ‘Atmanirbhar, Agrani and Atulya Bharat’ (self-reliant, pioneering and unparalleled India) by 2047, where strategic autonomy underpins national power.
The Scale of the Shift
Consider the scale of the shift. India’s defence budget has risen from ₹2.53 trillion in 2013-14 to ₹7.85 trillion in 2026-27, an increase of ₹5.32 trillion in just over a decade. More important than the absolute rise, however, is the changing composition of spending and its intent.
For decades, defence indigenization remained weak despite repeated expert assessments and official reviews. Multiple expert committees, from the A.P.J. Abdul Kalam Committee in the 1990s to the Kelkar, Sisodia and Naresh Chandra panels, identified structural weaknesses in procurement, R&D and industrial participation.
The diagnosis was consistent: excessive reliance on imports, a dominant but inefficient public sector, limited private participation and weak incentives for technological absorption. Despite this, defence procurement remained import-oriented before 2014, the private sector faced procedural and policy uncertainty and indigenous content thresholds remained modest.
A Systems Approach
The NDA government under Prime Minister Modi adopted a systems approach, wherein both demand and supply of military products was looked upon holistically. Defence indigenization, which was neglected, got a major boost.
It is not solely an economic objective. Countries with credible defence industries possess greater strategic flexibility, particularly in periods of geopolitical stress. When supply chains are weaponized and allies cannot be relied upon, the ability to produce your own weapons is not a luxury; it is a necessity.
Nearly 75% of the capital acquisition budget is now reserved for Indian manufacturers. This allocation directly aligns fiscal policy with procurement reform under the Defence Acquisition Procedure, which prioritizes domestic suppliers and mandates minimum indigenous content of 50%, significantly higher than pre-2014 thresholds.
The focus is on platforms and systems that determine future military capability: combat aircraft, naval vessels, submarines, unmanned systems, missiles and networked command-and-control infrastructure. These are not commodities; they are the sinews of national power.
Production and Export Data
The results are visible in production data. India’s defence production has increased from ₹74,054 crore in 2016-17 to nearly ₹1.46 trillion in 2024-25. The private sector now contributes around 22% of total output (about ₹32,000 crore), a notable change from a time when private firms were largely excluded from arms manufacturing.
Indian defence exports have followed a similar trajectory, rising from ₹1,522 crore in 2016-17 to ₹23,622 crore in 2024-25, with exports to more than 85 countries. This expansion reflects growing demand for Indian platforms in international markets. Countries that once looked only to traditional suppliers are now considering India.
Industrial Corridors
Defence industrial corridors in Tamil Nadu and Uttar Pradesh have played a role in anchoring production geographically. These corridors integrate defence public sector units, private firms and micro, small and medium enterprises with testing facilities, certification infrastructure and logistics networks.
Over 12,000 MSMEs are now part of defence supply chains, strengthening industrial depth. This is not just about large defence PSUs; it is about building an ecosystem where small suppliers can thrive, innovate, and grow.
Institutional Reforms
Institutional design also constrained outcomes earlier. The Defence Procurement Procedure introduced in 1992 granted the right of first refusal to the Defence Research and Development Organisation, while its leader often simultaneously served as scientific advisor to the ministry of defence, creating an inherent conflict of interest.
DRDO officials later acknowledged that in an effort to retain projects, timelines and budgets were frequently underestimated. Meaningful private sector participation and competition began only after 2001, under the Atal Bihari Vajpayee government. The pace has accelerated since 2014.
Operational Validation
Operational use remains the most demanding test of defence indigenization. Indigenous systems played a central role in Operation Sindoor across mission profiles: Brahmos and Sky Striker were employed in offensive strikes against terrorist and military targets, while defensive coverage was provided by the Integrated Air Command and Control System (IACCS), Akash, the Akash air defence system and the Drone-Detect, Deter and Destroy (D4) system, which together countered missile and drone threats.
This experience matters because it alters risk perceptions within the armed forces and industry. When soldiers use indigenous equipment in combat and it performs, the psychological barrier to relying on domestic systems dissolves.
FDI and Licensing
Since 2014, defence industrial reform has moved from intent to execution. The foreign direct investment cap in the defence sector was progressively liberalized from 26% to 74% under the automatic route, resulting in cumulative inflows of ₹5,700 crore by 2024.
Industrial licensing for private manufacturers was streamlined, a standard operating procedure for defence export authorization was instituted and private firms were granted access to government testing facilities. These may seem like bureaucratic details, but they matter immensely to businesses trying to navigate the system.
The Coherence of the Framework
The significance of the current phase of defence reforms lies less in headline allocations and more in the coherence of the underlying framework. Capital spending, procurement priorities, industrial participation and defence R&D are now aligned towards a single objective: reducing strategic vulnerability by building domestic capability.
This marks a clear break from earlier periods where higher expenditure coexisted with continued dependence on external suppliers. Money was spent, but the capability to produce at home did not grow. That is no longer the case.
Conclusion: From Intent to Execution
India’s defence transformation is no longer defined by intent or aspiration alone. It is being actively shaped by execution, validation and outcomes—attributes essential for a country seeking long-term strategic autonomy in a world of increased uncertainty.
The budget increase is welcome, but the real story is the shift in composition, the opening to private industry, the focus on exports, and the operational validation of indigenous systems. India is not just buying weapons; it is building the capacity to make them.
Q&A: Unpacking India’s Defence Indigenization
Q1: What is the scale of the defence budget increase?
The defence budget has risen from ₹2.53 trillion in 2013-14 to ₹7.85 trillion in 2026-27—an increase of ₹5.32 trillion. The 2026-27 allocation is 15.2% higher than the previous year and represents 14.7% of total central government spending, positioning defence as a core component of state capacity.
Q2: How has defence production and export grown?
Defence production increased from ₹74,054 crore in 2016-17 to nearly ₹1.46 trillion in 2024-25. Private sector now contributes about 22% of total output. Exports rose from ₹1,522 crore to ₹23,622 crore over the same period, reaching more than 85 countries. This reflects growing international demand for Indian platforms.
Q3: What institutional reforms have enabled this transformation?
Key reforms include: reserving 75% of capital acquisition budget for Indian manufacturers; raising minimum indigenous content to 50%; liberalizing FDI to 74% under automatic route; streamlining industrial licensing; establishing defence industrial corridors in Tamil Nadu and Uttar Pradesh; and integrating over 12,000 MSMEs into supply chains.
Q4: How has operational use validated indigenous systems?
Indigenous systems played central roles in Operation Sindoor. Brahmos and Sky Striker were used offensively; IACCS, Akash air defence, and D4 systems provided defensive coverage. Operational validation alters risk perceptions within armed forces and industry, building confidence in domestic equipment.
Q5: What is the strategic significance of defence indigenization?
Countries with credible defence industries possess greater strategic flexibility during geopolitical stress. Reducing dependence on external suppliers insulates India from supply chain weaponization and unreliable allies. Defence indigenization is not just an economic objective but a strategic imperative for long-term autonomy.
