Building a Strong Defence Industrial Base in India

22.12.2025

Building a Strong Defence Industrial Base in India

Context

The debate on establishing a robust Defence Industrial Base (DIB) has intensified as India sets ambitious targets to achieve ₹3 lakh crore in defence production and ₹50,000 crore in defence exports by 2029, amidst rising geopolitical instability and global supply-chain vulnerabilities.

About India’s Defence Industrial Base

Definition: A Defence Industrial Base is a comprehensive ecosystem comprising public and private firms, MSMEs, R&D laboratories (like DRDO), testing infrastructure, and supply chains capable of designing, manufacturing, maintaining, and exporting defence platforms and advanced technologies.

Key Trends and Data:

• Production Milestones: India achieved its highest-ever defence production of ₹1.54 lakh crore in FY 2024–25.
• Indigenous Growth: Production value rose to ₹1,27,434 crore in FY 2023–24, marking a 174% increase since 2014–15.
• Export Surge: A record ₹23,622 crore exported in FY 2024–25 to over 100 nations.
• Ecosystem Depth: Supported by 16,000 MSMEs and 462 companies holding 788 industrial licenses.
• Private Sector Participation: Now accounts for approximately 23% share of total production.

Necessity of an Indigenous Defence Industrial Base (IDIB)

1. Strategic Autonomy: Insulates national security from foreign sanctions and "push-button vetoes" during conflicts.
   • Example: The BrahMos Missile System ensures India retains full operational control without external interference.
2. Operational Readiness: Enables rapid repairs and contextual modifications for specific terrains.
   • Example: During the Ladakh standoff, HAL rapidly adapted LCA Tejas and ALH Dhruv for extreme high-altitude conditions.
3. Economic Multiplier: Catalyzes high-skill employment and innovation in aerospace, electronics, and metallurgy.
   • Example: Defence Industrial Corridors in UP and Tamil Nadu have attracted majors like Tata Advanced Systems and L&T.
4. Geopolitical Leverage: Transforms industrial capability into diplomatic influence and security partnerships.
   • Example: Exporting BrahMos to the Philippines (2024) shifted India’s role from an importer to a regional security provider.

Government Initiatives

• Procurement Reforms: Defence Acquisition Procedure (DAP) 2020 prioritizes Buy (Indian-IDDM) categories.
• Corporatization: Transforming the Ordnance Factory Board (OFB) into seven Defence Public Sector Undertakings (DPSUs) to improve efficiency.
• FDI Liberalization: Allowed up to 74% through the automatic route and up to 100% via government approval.
• Innovation Ecosystem: Launch of iDEX (Innovations for Defence Excellence) and the Technology Development Fund (TDF) to link startups with military needs.
• Infrastructure: Development of dedicated Defence Industrial Corridors in Uttar Pradesh and Tamil Nadu.

Challenges

• Regulatory Complexity: Overlapping approvals for technology transfers and joint ventures slow down project execution.
• Testing Bottlenecks: Lengthy multi-terrain trials and limited infrastructure delay the induction of indigenous systems (e.g., ATAGS artillery underwent six years of trials).
• Financing Constraints: High working capital needs and long order cycles make credit access difficult for MSMEs and drone startups.
• R&D-to-Production Gap: Difficulties in scaling successful prototypes into mass-produced, reliable systems (e.g., the Nishant UAV challenges).
• Demand Uncertainty: Frequent cancellations or re-tendering discourage long-term private investment in specialized infrastructure.

Way Forward

1. Single-Window Agency: Establish a professionally run agency to fast-track export licensing and coordination.
2. Long-Term Roadmap: Provide 10–15 year predictable procurement pipelines to encourage private capital investment.
3. Re-orienting DRDO: Limit DRDO to frontier research while empowering the private industry to handle large-scale manufacturing.
4. Specialized Finance: Introduce credit guarantees and sovereign lines of credit specifically for defence MSMEs.
5. Global Standards: Align testing and certification with international norms to shorten trial periods and boost export acceptance.
6. Ease of Business: Simplify compliance and ensure time-bound payments to sustain the cash flow of startups.

Conclusion

A strong defence industrial base serves as both India’s shield and springboard, protecting sovereignty while fueling innovation-led growth. While production and export trajectories are positive, deep-rooted reforms in finance, testing, and demand certainty are essential. Achieving Atmanirbharta in defence is a vital pillar for the vision of Viksit Bharat 2047 and India’s global strategic credibility.