India’s defence exports have surged more than 25-fold from Rs 15 billion in FY2017 to a record Rs 384 billion in FY2026, while domestic defence production has climbed to an all-time high of Rs 1.54 trillion in FY2025, reflecting a structural shift in the country’s military-industrial ecosystem towards indigenous manufacturing and export-led growth, according to a new Rubix Data Sciences report.
The report said the expansion has been driven by sustained government focus on self-reliance under the Atmanirbhar Bharat and Make in India initiatives, rising participation of private firms, increased domestic procurement, and growing global demand for Indian-made defence systems.
India has also set ambitious medium-term targets of achieving Rs 3 trillion in defence production and Rs 500 billion in defence exports by FY2029, signalling a long-term strategic shift from import dependence toward domestic manufacturing capability.
The report noted that India’s defence budget has nearly tripled over the past decade, rising from Rs 2.53 trillion in FY2014 to Rs 7.85 trillion in FY2027, while the country ranked as the world’s fifth-largest military spender in 2025. Defence spending has broadly remained stable at around 2 per cent of GDP, reflecting what the report described as a calibrated balance between fiscal discipline and military modernisation.
According to the report, the government’s procurement strategy is increasingly favouring domestic industry. In FY2025, the Ministry of Defence signed 193 contracts worth Rs 2.09 trillion, with nearly 92 per cent of contracts by volume and 81 per cent by value awarded to Indian firms.
The shift has significantly widened the role of private industry in defence manufacturing. The private sector’s share in defence production increased from 19 per cent in FY2017 to 23 per cent in FY2025, while nearly 16,000 MSMEs are now participating in the defence ecosystem. The report added that 788 industrial licences have been issued to 462 companies, reflecting deepening industrial participation.
The export profile of India’s defence sector has also evolved rapidly. India is now exporting defence equipment to more than 80 countries, including missiles, naval systems, artillery, radars, drones, armoured vehicles and electronic warfare systems. Major export products include the BrahMos cruise missile, Akash air-defence system, Pinaka rocket systems, ATAGS artillery guns, Swathi weapon locating radars, Dornier aircraft and specialised naval vessels.
The report said India moved closer in December 2025 to finalising BrahMos missile export deals with Vietnam and Indonesia collectively valued at more than Rs 40 billion, highlighting rising international demand for Indian-made weapons systems.
Data cited from the Stockholm International Peace Research Institute showed naval platforms accounted for nearly 55 per cent of India’s defence exports between 2016 and 2025, followed by artillery systems at 13 per cent and missiles at 12 per cent. The report noted that exports of naval vessels surged sharply in recent years, while exports of missiles and munitions recorded around 65 per cent compound annual growth between FY2018 and FY2026.
Despite the rapid rise in indigenous production, India remains the world’s second-largest arms importer, accounting for 8.2 per cent of global imports between 2021 and 2025. However, the report said India’s sourcing pattern is becoming increasingly diversified. Russia’s share in India’s arms imports has fallen from around 70 per cent during 2011-2015 to about 40 per cent during 2021-2025, while France emerged as the second-largest supplier with a 29 per cent share, followed by Israel at around 15 per cent.
The report said India approved a record level of defence procurements during FY2026, including approvals worth USD 71 billion covering Rafale fighter jets, transport aircraft, submarines, missile systems, surveillance platforms and air-defence systems.
At the same time, the report identified persistent structural challenges that could slow India’s self-reliance ambitions. These include continued dependence on imported jet engines, advanced semiconductors, sensors and strategic systems such as the S-400 air-defence platform. It also pointed to limited scale among private manufacturers, gaps in high-end R&D capability and vulnerabilities arising from global supply chain disruptions and technology transfer restrictions.
The report cited the indigenous Kaveri jet engine programme’s failure to meet operational requirements even after decades of development as an example of India’s technological gaps in advanced propulsion systems. It also referred to reported disagreements between India and France over access to sensitive aircraft systems and integration rights in the proposed 114-Rafale fighter acquisition programme.
Government policy interventions remain central to the sector’s expansion. The report highlighted reforms such as the Defence Acquisition Procedure 2020 and draft DAP 2026, the Defence Procurement Manual 2025, Positive Indigenisation Lists, defence industrial corridors in Uttar Pradesh and Tamil Nadu, the SRIJAN portal and drone-focused production-linked incentives.
The Uttar Pradesh and Tamil Nadu defence corridors together have already attracted investments exceeding Rs 91.4 billion and facilitated 289 MoUs, with projected investment opportunities of about Rs 664 billion.
India’s defence start-up ecosystem has also expanded sharply. According to the report, more than 1,000 defence start-ups are now active in the country, while over 950 aerospace, maritime and defence technology start-ups founded between 2017 and 2025 collectively attracted nearly USD 2 billion in funding.
The report concluded that India’s defence sector is entering a long-term expansion phase driven by self-reliance policies, rising geopolitical tensions, growing export acceptance, expanding private participation and increasing adoption of advanced technologies such as drones, AI and electronic warfare systems. However, it warned that achieving full strategic autonomy would require sustained progress in critical technology development, deeper domestic R&D capability and reduced dependence on foreign suppliers for high-end systems.
