India's Domestic Defence Production Surges to ₹1.78 Lakh Crore

GS-3: Security & Defence Technology · 15 August 2026 · Based on The Hindu (original report)

2-minute summary

India's domestic defence production reached a historic milestone of ₹1.78 lakh crore in FY 2025-26, registering a nearly four-fold increase from ₹46,000 crore in 2014. This growth reflects the momentum generated under the 'Make in India' and 'Aatmanirbhar Bharat' initiatives. Public Sector Undertakings (DPSUs) accounted for 76% of total domestic production, while the private sector contributed 24%. Simultaneously, defence exports surged by over 5,500%—from ₹686 crore in 2013-14 to ₹38,424 crore in 2025-26—with 145 exporters supplying systems to more than 80 countries, putting India on track to achieve its ₹50,000-crore export target by 2029. The total defence budget expanded to ₹7.85 lakh crore in 2026-27, with capital expenditure rising to ₹2.19 lakh crore and R&D spending increasing to ₹29,100 crore. Strategic milestones cited include tests of the MIRV-equipped Agni missile, Long-Range Land Attack Cruise Missile, Kusha surface-to-air missile, and a record 1,200-second endurance test of an active-cooled scramjet combustor.

Why it's in the news

Defence Minister Rajnath Singh announced that India's domestic defence production touched an all-time high of ₹1.78 lakh crore in FY 2025-26, alongside record defence exports of ₹38,424 crore, highlighting India's emergence as a major manufacturing hub and net defence exporter.

Background and context

Historically, India was among the world's largest arms importers, relying heavily on foreign original equipment manufacturers (OEMs) for major platforms. This import dependence posed strategic vulnerabilities, foreign exchange outflows, and supply-chain risks during geopolitical crises. To address these vulnerabilities, the Government of India introduced policy shifts over the last decade, including the Defence Acquisition Procedure (DAP), Positive Indigenisation Lists, corporatisation of the Ordnance Factory Board (OFB) into dedicated Defence Public Sector Undertakings (DPSUs), and schemes like Innovations for Defence Excellence (iDEX). Furthermore, opening up the defence sector to private participation and raising Foreign Direct Investment (FDI) limits up to 74% under the automatic route created an indigenous ecosystem spanning aerospace, naval shipbuilding, guided weapons, and electronic warfare systems.

Constitutional provisions

• Seventh Schedule (Union List, Entry 1 & 2) — Places the defence of India and armed forces exclusively under the legislative and executive competence of the Union Government.

Committees and reports

• Lt. Gen. D.B. Shekatkar Committee — Recommended measures to enhance combat capability, optimize defence expenditure, and foster defence indigenisation and private sector integration.
• Vijay Kelkar Committee — Recommended enabling private sector participation in defence production through Raksha Udyog Ratnas (RURs) and streamlining procurement.

Government schemes

• Innovations for Defence Excellence (iDEX) — Fosters innovation and technology development in defence and aerospace by engaging startups, MSMEs, and individual innovators.
• Positive Indigenisation Lists (PIL) — Bans the import of specified weapons, platforms, and sub-systems beyond scheduled timelines to boost domestic manufacturing.
• Defence Industrial Corridors (DICs) — Set up in Uttar Pradesh and Tamil Nadu to create dedicated industrial clusters for domestic defence manufacturing.

Mains practice: Examine the role of policy interventions and private sector participation in transforming India from a net arms importer to an emerging defence exporter.

India's defence manufacturing has witnessed a structural transition, with domestic production reaching ₹1.78 lakh crore and exports touching ₹38,424 crore in 2025-26. This reflects a paradigm shift from import dependency to self-reliance (Aatmanirbharta).

Key Policy Interventions Driving the Transformation:

• Positive Indigenisation Lists: Phased import embargoes on hundreds of military items mandated procurement from domestic sources.

• Defence Acquisition Procedure (DAP): Prioritised 'Buy (Indian-IDDM)' categories and introduced streamlined procurement procedures to encourage local manufacturing.

• R&D and Budgetary Ringfencing: Earmarking a dedicated portion of the capital acquisition budget for domestic procurement and raising defence R&D allocations.

• OFB Corporatisation: Restructuring the Ordnance Factory Board into functional DPSUs improved operational efficiency, financial autonomy, and product quality.

Role of the Private Sector and Startups:

• Rising Production Share: Private firms now contribute 24% of domestic defence output, manufacturing critical systems, ammunition, and aerospace components.

• Fostering Innovation: Platforms like iDEX (Innovations for Defence Excellence) and the Technology Development Fund (TDF) have integrated deep-tech startups into defence supply chains.

• Export Footprint: Indian private and public entities now export weapon systems, radars, and ammunition to over 80 partner countries.

Conclusion:

Sustaining this momentum requires expanding critical technology R&D, boosting test infrastructure, and addressing supply chain dependencies in semiconductors and specialized alloys to achieve long-term strategic autonomy.

Prelims practice questions

Q1. Consider the following statements regarding India's defence production and export trends: 1. The private sector accounts for more than 50% of the total domestic defence production in India. 2. Defence exports have expanded to over 80 countries worldwide. 3. The Positive Indigenisation List imposes a complete ban on domestic manufacturing of specified arms. Which of the statements given above is/are correct?

1. 1 and 2 only
2. 2 only
3. 2 and 3 only
4. 1, 2 and 3

Answer: B. Statement 1 is incorrect because public sector entities account for ~76% and the private sector accounts for ~24% of production. Statement 2 is correct as India exports defence goods to over 80 countries. Statement 3 is incorrect because Positive Indigenisation Lists ban the import of specified equipment, thereby promoting domestic manufacturing.

Q2. Project 'Kusha', recently in the news, relates to which of the following?

1. Indigenous long-range surface-to-air missile defence system
2. Autonomous unmanned combat aerial vehicle
3. Military communication satellite
4. Deep-sea submarine rescue system

Answer: A. Project Kusha refers to India's indigenous Long-Range Surface-to-Air Missile (LR-SAM) defence system being developed by DRDO to detect and destroy enemy aircraft, cruise missiles, and ballistic missiles.

Q3. Which committee was specifically constituted to recommend measures for enhancing military combat capability and rebalancing defence expenditure?

1. K. Radhakrishnan Committee
2. D.B. Shekatkar Committee
3. Kasturirangan Committee
4. Bibek Debroy Committee

Answer: B. The Lt. Gen. D.B. Shekatkar Committee was tasked with recommending measures to enhance combat potential and optimize defence expenditure of the armed forces.

Revision flashcards

• What is the recorded value of India's domestic defence production in FY 2025-26? ₹1.78 lakh crore, marking a nearly four-fold rise from ₹46,000 crore in 2014.
• What is the breakdown between the public and private sectors in India's defence production? Defence Public Sector Undertakings (DPSUs) account for ~76%, while the private sector contributes ~24%.
• What is India's target for annual defence exports by 2029? ₹50,000 crore (defence exports reached ₹38,424 crore in FY 2025-26).
• What is Project Kusha? An indigenous long-range surface-to-air missile (LR-SAM) air defence system developed to counter diverse aerial threats.
• What is the primary objective of Positive Indigenisation Lists (PIL)? To prohibit the import of designated military platforms, subsystems, and ammunition to incentivize domestic production.