India's Defence Sector Transformation and Growth
India's defence sector has undergone significant transformation with substantial budget growth and increased self-reliance. The defence budget increased 3.1-fold from ₹2.53 lakh crore in 2013–14 to ₹7.85 lakh crore in 2026–27, while capital expenditure grew 2.3-fold from ₹94,587.95 crore in 2014–15 to ₹2.19 lakh crore in 2026–27, enabling sustained military modernization.
Defence production reached a record ₹1.78 lakh crore in 2025–26, with 76% from public-sector entities and 24% from the private sector. Defence exports demonstrated remarkable growth, increasing 56-fold from ₹686 crore in FY2013–14 to ₹38,424 crore in FY2025–26, reaching over 80 countries. The private sector contributed ₹17,353 crore (45.16%) of defence exports, while Defence Public Sector Undertakings contributed ₹21,071 crore (54.84%). The government has set ambitious targets of ₹3 lakh crore in annual defence production and ₹50,000 crore in exports by 2029.
Key Initiatives and Reforms
The Defence Acquisition Council (DAC) has accorded Acceptance of Necessity for over ₹6 lakh crore of DRDO-designed, Indian industry-manufactured systems. Major indigenous acquisitions include 97 Tejas Mk-1A fighter jets worth ₹62,000 crore and 156 LCH Prachand helicopters worth ₹62,700 crore. Defence procurement reforms include Defence Acquisition Procedure (DAP) 2020, Defence Procurement Procedure (DPP) 2016, and Defence Procurement Manual (DPM) 2025 which streamlined nearly ₹1 lakh crore in revenue procurement. The draft DAP 2026 proposes simpler acquisition categories and indigenous content requirements of up to 60%.
Defence R&D allocation increased by over 112% from ₹13,716.14 crore in 2014–15 to ₹29,100.25 crore in 2026–27. Since 2022–23, 25% of the defence R&D budget has been opened to industry, start-ups and academia. The Innovations for Defence Excellence (iDEX) scheme with ₹498.78 crore outlay engaged 676 startups, MSMEs, and innovators, resulting in 551 design and development contracts as of March 2026. The ADITI Scheme with ₹750 crore outlay (2023–24 to 2025–26) provides financial support through the Defence Innovation Organisation to accelerate innovative defence technologies.
Industrial Development and Infrastructure
Ten Positive Indigenisation lists covering 5,521 items were notified by May 2026, resulting in increased self-reliance in defence production. The Srijan Defence Equipment Empowerment Platform (DEEP) listed over 41,000 vendors and 2.7 lakh products by May 2026. The Uttar Pradesh Defence Industrial Corridor attracted ₹42,057 crore in investment commitments with ₹4,409 crore grounded by April 2026, while the Tamil Nadu Defence Industrial Corridor attracted ₹32,699 crore with ₹6,446 crore realised.
Ease of doing business measures included extending industrial licence validity from 7 (+3) years to 15 (+3, up to 18) years, with lifetime validity granted under the Arms Act. The FDI limit in defence was increased to 74% under the Automatic Route and up to 100% via the Government Route, attracting ₹6,670.59 crore in inflows by March 2026.
Technological Advancements and Operational Capabilities
The Indian Army achieved approximately 91% self-sufficiency by indigenising 159 out of 175 ammunition variants. India successfully tested Agni-4 Intermediate Range Ballistic Missile and Agni-5 Long Range Surface-to-Surface Ballistic Missile, validating operational and technical parameters. The TARA Glide Weapon and RudraM-II air-to-surface missile demonstrated indigenous precision-strike capabilities.
DRDO advanced multiple indigenous systems including Kusha Long Range Air Defence Missile and Very Short-Range Air Defence System (VSHORADS). The Indian Navy commissioned 12 warships and submarines including INS Surat, INS Nilgiri, and INS Vaghsheer. INS Mahendragiri stealth frigate entered service with over 75% indigenous content. DRDO successfully tested the Naval Anti-Ship Missile–Medium Range and demonstrated multi-layered Ballistic Missile Defence capability.