India’s defence sector is undergoing a fundamental transformation. Once largely an import-driven buyer’s market, it is now emerging as a globally relevant defence manufacturing, innovation, and export ecosystem. Driven by geopolitical imperatives, sustained defence spending, and a strong policy push for indigenisation, India offers long-term strategic opportunities for global defence companies willing to engage beyond transactional sales.
Pawan Bhatnagar, Managing Director, Kasvu Consulting, analyses the Indian defence market and maps opportunities for global defence companies in India.
Market Size and Strategic Momentum
India is among the world’s largest defence spenders. For FY 2025–26, defence allocation stands at approximately USD 79–80 billion, with capital procurement exceeding USD 20 billion, reflecting a strong focus on modernisation across air, land, naval, cyber, and space domains.
Defence manufacturing output reached nearly USD 18 billion in FY 2024–25—almost doubling over five years—while India’s overall defence market is estimated at USD 30+ billion and projected to cross USD 37 billion by 2030. Defence exports have grown sharply to about USD 2.8 billion, with Indian companies supplying products to nearly 80 countries. These trends signal India’s transition from import dependency to indigenous production and export capability.
India’s Defence Ecosystem: Complex but Opportunity-Rich
India’s defence ecosystem is broad and multi-layered. At its core are Defence Public Sector Undertakings (DPSUs) such as HAL, BEL, BDL, and major shipyards, supported by the Defence Research and Development Organisation (DRDO). Alongside them, large private defence firms, MSMEs, and a growing base of defence-focused startups play critical roles in electronics, software, precision manufacturing, advanced materials, and subsystem development.
While this ecosystem creates multiple entry points for global companies, it is also highly regulated, stakeholder-intensive, and procedurally complex. Navigating defence users, procurement agencies, DPSUs, private primes, R&D bodies, and state-level industrial infrastructure requires deep local understanding and sustained engagement.
Policy Framework Enabling Global Collaboration
India’s defence policies are explicitly designed to encourage localisation and partnerships. The Defence Acquisition Procedure (DAP) 2020 prioritises indigenously designed, developed, and manufactured systems, making technology transfer, co-development, and local manufacturing central to successful bids.
The Make in India (Defence) initiative further supports this through structured “Make” programmes and selective liberalisation of foreign direct investment.
Innovation-Led Entry Pathways
- iDEX: Enables startups and MSMEs—Indian and foreign—to access defence challenges, funding, and user validation.
- Defence Testing Infrastructure Scheme (DTIS): Reduces certification bottlenecks through domestic testing facilities.
- SRIJAN: Provides visibility into import substitution and indigenisation opportunities across DPSUs and the armed forces.
Together, these initiatives signal a clear shift toward collaborative, capability-building partnerships.
Where Global Defence Companies Can Add Value
- Advanced electronics, sensors, and secure communications
- Cybersecurity, electronic warfare, AI-enabled and autonomous systems
- Aerospace components, propulsion, and advanced materials
- Testing, MRO, and lifecycle support services
India is also increasingly positioned as an export-oriented manufacturing base, enabling jointly developed products to address regional and global markets.
Kasvu Consulting Perspective: Why Local Guidance Matters
At Kasvu Consulting, experience shows that success in India’s defence market is less about market access and more about market navigation. Global defence companies often underestimate the complexity of aligning policy frameworks, procurement timelines, stakeholder expectations, and localisation requirements.
A knowledgeable local partner plays a critical role in:
- Identifying the right entry pathway (JV, co-development, Make-II, iDEX, or supplier integration)
- Mapping and engaging with relevant defence stakeholders beyond formal buyers
- Structuring partnerships aligned with Indigenous Content and compliance norms
- Bridging cultural, regulatory, and operational gaps between global OEMs and Indian counterparts
- Supporting long-term positioning rather than short-term deal execution
Published by Kasvu Consulting | Experts in Finland–India Business Synergies | Contact for full analysis or bespoke market entry strategies | November 2025