Santosh Sharma
The recent hostilities between India and Pakistan have once again highlighted a stark truth: warfare, regardless of its scale or region, exacts a significant economic cost. This has been the case historically, and it continues to hold true today. Waging war is no longer solely about manpower and traditional weaponry; it requires vast financial resources, technological infrastructure, and logistical agility. Modern warfare, as evidenced in the recent India-Pakistan tensions and the ongoing Ukraine-Russia conflict, is increasingly reliant on cutting-edge systems, cyber capabilities, unmanned vehicles, and precision weapons. The nature of war is evolving—and fast. It is now abundantly clear that a nation heavily dependent on foreign imports for its defence needs stands on precarious ground. The election of Donald Trump in the United States, and the policy shifts it brought, has underscored the geopolitical risks of import reliance in defence sectors, making it clear that self-reliance is no longer a choice, but a necessity.
Amidst this shifting global backdrop, India is waking up to the urgency of building a robust domestic defence manufacturing ecosystem. While the share of manufacturing in India’s overall GDP has been declining, a significant exception has emerged in the form of defence manufacturing—a sector that is now showing a gradual, determined upward trajectory. This shift is not merely reactive, but strategic. The dynamics of global alliances have also shifted: China’s proactive support to Pakistan in supplying arms and military technology has created an additional layer of urgency for India to bolster its own indigenous defence capabilities.
In recent years, the Indian government has taken serious steps to build these capabilities. India’s defence production reached an estimated INR 1.27 lakh crore in the financial year 2023-24, reflecting a staggering 174 per cent increase over the past decade. This growth is not confined to figures on paper but is materialising on the ground, as seen in the increasing deployment of indigenous systems during periods of heightened security threats. Under the overarching umbrella of the ‘Atmanirbhar Bharat’ (Self-Reliant India) initiative, India has been moving away from its historical dependence on imported defence systems and making significant strides in domestic innovation and production.
One of the cornerstones of India’s new defence capability is the BrahMos missile, a result of a joint venture with Russia but now largely indigenised. Known for its speed and precision, the BrahMos has played a vital role in recent precision-strike operations, demonstrating both tactical superiority and technological maturity. The newly inaugurated production facility in Lucknow—part of the Uttar Pradesh Defence Industrial Corridor—is expected to manufacture 80–100 BrahMos missiles annually, alongside 100–150 units of its next-generation variants. This facility not only secures India’s domestic supply but also positions the country to cater to international demand for high-performance defence equipment.
Equally significant is the Akash missile system, developed indigenously by the Defence Research and Development Organisation (DRDO) and containing over 96 per cent indigenous components. It is one of India’s most advanced and locally produced air defence systems. During recent hostilities, the Akash system proved its effectiveness by accurately intercepting aerial threats at critical moments. More than 250 Indian companies have been involved in producing subsystems and components for the Akash project, making it a textbook case of industrial collaboration, supply chain development, and national security convergence. DRDO is also actively enhancing the system’s capabilities and expanding its operational range, ensuring that future versions stay ahead of evolving threats.
Another notable development is the D4 anti-drone system, designed to address the rising threat of unmanned aerial vehicles (UAVs). Developed with inputs from DRDO labs across Bengaluru, Hyderabad, and Dehradun, the D4 system can detect, track, and neutralise drones using both soft-kill techniques like jamming and hard-kill measures like lasers. It is a reflection of India’s growing research and development prowess in dealing with new-age, asymmetric threats in modern warfare.
Yet, despite this progress, challenges remain. India is the fourth-largest spender on defence globally, after the United States, China, and Russia, and still imports around 40 per cent of its defence needs. Between 2020 and 2024, Russia accounted for 36 per cent of India’s arms imports, followed by France at 33 per cent, Israel at 18 per cent, and others making up the rest. India’s defence budget has increased substantially—from Rs 2.53 lakh crore in 2013-14 to a projected Rs 6.8 lakh crore in 2025-26. The 2024-25 budget alone allocated nearly Rs 1.7 lakh crore for defence procurement.
Historically, defence manufacturing in India has been dominated by 16 Public Sector Enterprises (PSEs). However, the ecosystem is expanding. Today, it also includes around 430 licensed private companies and approximately 16,000 Micro, Small and Medium Enterprises (MSMEs) supplying goods and services. By the end of FY24, total defence production had reached Rs 1.27 lakh crore, with nearly Rs 90,000 crore already clocked before the most recent hostilities. This figure excludes the Rs 2.09 lakh crore worth of defence contracts awarded in the current fiscal year—92 per cent of which were granted to Indian companies, with public sector firms like Hindustan Aeronautics Limited (HAL) playing a major role.
The Defence Procurement Board has also approved purchases worth Rs 4.25 lakh crore, with nearly 90 per cent intended for domestic manufacturing. Significant portions of this future manufacturing will be anchored in the Uttar Pradesh and Tamil Nadu Defence Corridors. Private sector giants like the Tata Group have chosen Vadodara, Gujarat, as their manufacturing base, reflecting the growing geographical spread of India’s defence industrial network.
However, this progress still represents only a fraction of the resources required to fully modernise India’s Armed Forces. Much of the existing equipment remains outdated, often based on legacy Soviet designs, especially in critical areas like troop transport aircraft. The need for advanced early warning systems, cost-effective anti-drone measures, and efficient inventory management is pressing. For instance, the Indian Navy alone is responsible for maintaining a diverse inventory of nearly 400 different types of equipment, including a vast range of ammunition and spares.
In the last two decades, India has begun to allow greater participation from the private sector in defence manufacturing. The emphasis on indigenisation now includes more than 310 specific items in addition to the 2,500 items previously indigenised. The government has released a larger list of 36,000 items intended for future indigenisation, aiming to achieve full self-reliance in defence manufacturing by 2032. These initiatives are not only important for national security but also for their broader economic impact—stimulating industrial activity, generating employment, and fostering innovation.
Defence sector jobs, unlike those in more volatile industries like technology or consumer services, are largely insulated from economic cycles. This makes them attractive, especially for educated and skilled youth looking for stable employment. As seen in the United States, where the aerospace and defence sector contributes nearly 4 per cent to the GDP and supports about 2 lakh companies and 22 lakh jobs, this sector can be an engine of high-quality employment. In fact, defence-related jobs in the US tend to pay about 50 per cent more than average national wages, due to the high level of skills and training required. Similarly, in the European Union, the defence sector employs over 10 lakh people and saw an 8 per cent increase in new jobs in the past year alone.
India has the potential to develop its own defence economy on a similar scale. However, building a sustainable military-industrial complex is a formidable task. It requires persistent investment in R&D, skilled manpower, and strategic vision. It is not enough for large private companies to invest in the hope of lucrative government contracts. Without a long-term, policy-driven approach to technology development, collaboration, and quality assurance, these investments may not yield the desired results.
Another crucial consideration is India’s position in the global defence supply chain. Foreign collaborations and joint ventures have the potential to accelerate India’s technological advancements. The government’s decision to allow 74 per cent foreign direct investment (FDI) in approved defence manufacturing units is a step in this direction. Russia’s March 2025 offer to co-produce its advanced S-500 missile system in India may be a direct result of this liberalised policy. Such collaborations bring not only investment and technology but also open the door to exporting Indian-manufactured defence equipment to global markets.
However, even as India scales up its defence manufacturing, quality control remains a critical challenge. High-quality production standards are non-negotiable in defence, and any lapse can have dire consequences. There is an urgent need to empower oversight bodies responsible for quality control, ensuring they function with autonomy and integrity. Without this, increased spending and manufacturing volumes may not translate into operational effectiveness or global competitiveness.
Finally, while the economic benefits of a robust defence manufacturing sector are undeniable—especially when other sectors of the economy face headwinds—the government must ensure that the defence supply chain remains secure. A reliable regulatory framework is essential to prevent defence technologies or components from falling into the wrong hands. National security must remain the guiding principle as India moves forward on this transformative path.
In conclusion, India is at a critical juncture. The journey towards becoming a self-reliant defence powerhouse is well underway, but the road ahead is complex and fraught with challenges. With careful planning, sustained investment, and an unwavering focus on quality and security, India can build a resilient, world-class defence industrial base—one that not only secures the nation but also drives its economic future.
(The author can be reached at [email protected])
