India’s Defense Exports Poised for Major Growth: Doubling to Rs 40,000 Crore in Two Years

Rajesh Uppal 9 hours ago Geopolitics, Strategy & Technological Rivalries, Industry & Market Dynamics, Strategy, Policy & Governance Comments Off on India’s Defense Exports Poised for Major Growth: Doubling to Rs 40,000 Crore in Two Years 812 Views

India, traditionally known as one of the world’s largest defense importers, is now making significant strides toward becoming a major exporter in the global defense market. With the government’s push for indigenous defense manufacturing, the “Make in India” initiative, and ambitious export targets, India’s defense industry is positioning itself as a formidable player on the international stage. This blog explores the current landscape of India’s defense exports, key initiatives driving growth, and the future potential of the sector.

India, the world’s fastest-growing major economy, is on track to become the third-largest economy within the next five years, a testament to its expanding global stature. However, economic growth alone is insufficient for a nation with soaring ambitions; it must also develop a robust defense-industrial complex capable of meeting domestic needs while emerging as a global supplier of advanced weapon systems.

The Evolution of India’s Defense Export Industry

For decades, India was heavily reliant on imports to meet its defense needs, with a focus on procuring advanced technologies from countries like Russia, Israel, and the U.S. However, recognizing the strategic and economic importance of reducing dependency on foreign suppliers, the Indian government has implemented several initiatives to boost domestic manufacturing capabilities and promote defense exports.

India has made remarkable strides in this direction. India’s defense exports have seen a steady rise. From FY 2016-17 to FY 2021-22, India’s defense exports grew almost six-fold, reaching around USD 1.63 billion. In 2024 defense exports grew by an impressive 32.5%, reaching ₹21,000 crore, up from ₹15,920 crore in 2022-23. This surge reflects India’s determination to achieve self-reliance in defense manufacturing and its ambition to be a global player.

Key to this transformation has been the focus on creating a robust indigenous defense manufacturing ecosystem and encouraging private sector participation. The synergy between the private and public sectors has been pivotal, with private companies contributing 60% of exports, while public sector enterprises accounted for the remaining 40% in 2023-24.

The government has set an ambitious target of achieving USD 5 billion in defense exports by 2025. India’s defense industry is on the verge of a significant transformation, with defense exports set to more than double in the next two years. Union Minister Anurag Thakur announced on March 24 that India’s defense exports will jump from Rs 16,000 crore to Rs 40,000 crore by 2025. This ambitious target is part of the government’s broader strategy to bolster domestic defense production, enhance export capabilities, and reduce dependence on foreign imports. According to Thakur, India’s current defense production stands at an impressive Rs 1 trillion, with exports amounting to Rs 16,000 crore. While this marks a substantial improvement over the past decade—where defense exports were a mere Rs 1,000 crore—there is still much ground to cover to achieve the government’s aggressive target of Rs 50,000 crore in defense exports by 2028-29.

However, India’s share in global arms exports remains relatively small. Historically, India constituted less than 1% of the total global arms exports. By comparison, countries like China, Brazil, Turkey, and South Korea have established themselves as significant players in the global arms market. For example, between 2011 and 2015, China’s arms exports grew by 88%, with the majority of sales going to Asia and Oceania, signaling the growing global competitiveness of Chinese arms manufacturing.

At the inaugural session of the Firstpost Defence Summit in New Delhi, February 2024, Indian Defence Minister Rajnath Singh highlighted India’s need to step out of its comfort zone to join the ranks of the world’s top 25 arms exporters. Prime Minister Narendra Modi’s government has focused on long-term goals to boost self-reliance in defense.

India supplies weapons and equipment to a diverse basket of countries, including Italy, the Maldives, Russia, Sri Lanka, the UAE, the Philippines, Saudi Arabia, Poland, Egypt, Israel, Spain and Chile. The US, UK and France are buying defence electronics from India, while Mauritius, Seychelles and the Maldives have procured fast interceptor boats. Defence ministry data shows India supplies bulletproof jackets to 34 countries, including Australia, Japan, Israel and Brazil. About 10 countries, including the UAE, Egypt, Indonesia and Thailand purchase ammunition from India.

The world’s interest in advanced Indian weapon systems is growing as well. India has already exported notable defense products like Dornier-228 aircraft, 155 mm Advanced Towed Artillery Guns, BrahMos Missiles, and the Akash Missile System. Furthermore, six countries are in discussions to purchase HAL’s indigenous light combat aircraft, Tejas. Singh emphasized that India aims to manufacture high-end systems, such as aero-engines and gas turbines, domestically within five years.

Government Initiatives Fueling Growth

The Modi government has taken unprecedented steps to halt arms imports, ensuring the Indian military increasingly relies on domestic resources. By 2022-23, India’s arms exports reached ₹16,000 crore, with over 100 companies exporting defense products to 85 countries. T Natarajan, Additional Secretary, Department of Defence Production, has set a target of increasing arms exports to ₹35,000 crore by 2025. However, significant challenges remain, including reliance on exporting parts and components rather than complete defense platforms. Issues with quality control, such as the Dhruv Advanced Light Helicopters exported to Ecuador, also hamper progress.

The government’s focus on developing indigenous defense manufacturing is at the heart of India’s growing export potential. The “Aatmanirbhar Bharat” (self-reliant India) initiative, which emphasizes local production across sectors, has had a profound impact on the defense industry. Prime Minister Narendra Modi has consistently advocated for self-reliance in defense, stating that the nation should not only produce weapons and defense systems for itself but also become a leading exporter in the global arms market.

A substantial reduction in India’s foreign defense expenditure has been achieved, with a 46% drop in 2022 compared to 2018-19, as reported by the defense ministry. In 2022-23, India’s defense production surpassed ₹1 lakh crore for the first time, signaling a growing domestic capacity. India’s inclusion in the Stockholm International Peace Research Institute (SIPRI) list of the world’s top 25 arms exporters in 2022 was celebrated as a significant milestone, with a 119% increase in exports between 2012-2016 and 2017-2021.

The government’s policy shift includes not only raising the foreign direct investment (FDI) cap in defence production from 49% to 74% but also simplifying the bureaucratic process for defence exports. The new policy includes measures to ease the process of supplying defence equipment to strategic partners. This is a critical move to ensure that friendly countries can purchase Indian-made defence platforms without facing excessive regulatory hurdles.

Several policy reforms and initiatives have been introduced to foster India’s defense exports:

Make in India: Launched in 2014, the “Make in India” initiative aims to promote domestic manufacturing across sectors, including defense. By encouraging foreign direct investment (FDI), technology transfers, and joint ventures between Indian and foreign companies, this initiative has laid the foundation for increased defense exports.
Defense Production and Export Promotion Policy (DPEPP) 2020: This comprehensive policy aims to position India among the top 25 defense exporters globally. It focuses on reducing the dependency on imports, promoting exports, and increasing the involvement of the private sector in defense production.
Innovations for Defense Excellence (iDEX): iDEX is a flagship program aimed at fostering innovation in defense and aerospace. Through grants and funding, it supports startups, MSMEs, and innovators in developing defense technologies with export potential.
Defence Acquisition Procedure (DAP) 2020: This policy prioritizes the procurement of indigenous defense products. It also includes provisions to promote the export of surplus defense equipment and incentivizes manufacturers to produce equipment with export potential.
Line of Credit for Defense Exports: India has extended lines of credit to several countries, facilitating the purchase of defense equipment manufactured in India. Countries such as Vietnam, Myanmar, and Bangladesh have benefited from these credit facilities.

Export Strategy and Defence Diplomacy India’s new defence export strategy is intertwined with defence diplomacy. Strengthening ties with countries in the Indian Ocean region and beyond, such as Indonesia, Vietnam, and Afghanistan, presents both diplomatic and commercial opportunities. Defence exports contribute to building local operational capabilities, which can enhance interoperability with Indian forces during joint missions and peacekeeping operations.

The Indian Ministry of Defence has proposed a Foreign Military Assistance scheme, modeled after the U.S. Foreign Military Sales program, to facilitate the export of Indian military equipment to friendly nations. This scheme is designed to optimize outcomes from lines of credit extended to partner countries, making the procurement process smoother and more transparent for foreign buyers.

Growing Defense Production and Export Targets

At a recent defense conclave, Defense Minister Rajnath Singh highlighted the significant progress India has made. He noted that annual defense production, which was around Rs 40,000 crore in 2014, has now surpassed Rs 1.10 trillion. This growth is in large part due to increased government investments in indigenous defense systems, public-private partnerships, and international collaborations.

Singh also underscored that high-end systems like aero-engines and gas turbines, which are currently imported, will soon be manufactured domestically. He reiterated the government’s target of reaching Rs 50,000 crore in defense exports by 2028-29, while defense production is expected to rise to Rs 3 trillion by 2028-29.

India’s Export Destinations and Products

India’s recent defense export achievements are significant, showcasing the nation’s growing presence in the international arms market. India’s defense exports include a wide array of products across different domains—land, air, sea, and space.

India’s defence exports span a diverse array of countries, including Algeria, Israel, Afghanistan, Bhutan, the UK, UAE, Indonesia, Nepal, and Sri Lanka, among others. Over 50 Indian private sector companies have played a role in these exports, with products ranging from ballistic helmets and armored plates to artillery guns and patrol vessels. India’s growing relationship with nations like Indonesia has led to collaboration in maritime security, which could present opportunities for further exports of naval systems, such as anti-submarine warfare corvettes and offshore patrol vessels.

For instance, the export of platforms like the BrahMos missile, co-developed with Russia, has garnered interest from several nations. The Philippines has already signed a deal for the BrahMos missile, and countries like Indonesia and Vietnam have shown interest in procuring this supersonic cruise missile.

Similarly, India’s indigenous Light Combat Aircraft (LCA) Tejas has been shortlisted by Malaysia for procurement, a major milestone for India’s defense aviation industry. Other defense products, such as radar systems, advanced light helicopters, and naval vessels, are also contributing to India’s growing export portfolio.

Some of the key defense products being exported are:

Light Combat Aircraft (LCA) Tejas: India’s indigenous fighter jet, the LCA Tejas, has garnered interest from countries like Malaysia, which has shortlisted it for procurement. The aircraft represents India’s growing capability in developing world-class fighter jets.
BrahMos Missile: Developed jointly with Russia, the BrahMos supersonic cruise missile is one of India’s most successful defense export products. The Philippines became the first foreign customer to order the BrahMos in 2022, and other countries like Indonesia and Vietnam have expressed interest.
Advanced Light Helicopter (ALH) Dhruv: Manufactured by Hindustan Aeronautics Limited (HAL), the ALH Dhruv is being exported to countries like Mauritius, Maldives, and Ecuador. It serves as a multi-role helicopter, used for both military and civilian purposes.
Radar Systems: Bharat Electronics Limited (BEL), one of India’s leading defense electronics manufacturers, exports radar systems, communication equipment, and electronic warfare systems to countries in Southeast Asia and Africa.
Small Arms and Ammunition: India is also exporting small arms and ammunition to several countries, including the INSAS rifle and other infantry equipment developed by the Ordnance Factory Board (OFB).
Naval Platforms: India has made significant strides in naval exports, with warships, patrol vessels, and other naval systems being exported to countries like Vietnam, Sri Lanka, and the Seychelles.

Growth of Private Sector and Defence PSUs

India’s defence sector has been characterized by significant contributions from both public and private sectors. The production by Ordnance Factory Boards (OFBs) and Defence Public Sector Units (DPSUs) has increased by 25% over the last two years, and private sector exports have shown accelerated growth. However, despite these successes, challenges remain. India’s state-owned PSUs have struggled to compete on cost, sustainment, and delivery times, which has limited their global export potential.

Hindustan Aeronautics Limited (HAL), for example, has produced capable systems like the Dhruv advanced light helicopter, but it has failed to gain traction in civil markets due to high costs. Similarly, while systems like the Akash missile and Pinaka rocket artillery have shown promise domestically, they have not yet achieved significant sales abroad. The MoD aims to improve this by promoting products that have already been procured by the Indian military to foreign buyers, simplifying the testing and negotiation processes for these platforms.

Challenges and Opportunities

While India’s defense export sector is on a growth trajectory, several challenges remain. The global defense market is highly competitive, dominated by established players like the U.S., Russia, France, and Israel. Indian defense products need to consistently demonstrate high quality, reliability, and cutting-edge technology to compete with these global giants.

Despite the remarkable progress, India remains the world’s largest arms importer. According to the Stockholm International Peace Research Institute (SIPRI), India accounted for 9.8% of global arms imports between 2019 and 2023. Tensions with neighboring countries Pakistan and China continue to drive India’s defense purchases, but the country is looking to shift its focus towards self-reliance.

SIPRI’s latest report revealed that India’s arms imports increased by 4.7% between 2014–18 and 2019–23. While Russia remains India’s primary supplier of arms, its share has significantly reduced—from 76% in 2009–13 to 36% in 2019–23—as India increasingly turns to Western suppliers like France and the U.S., and importantly, its own domestic defense industry.

However, India continues to face substantial hurdles in its journey toward becoming a defense manufacturing powerhouse. While the “Make in India” initiative has accelerated indigenous defense production, it is far from instantaneous. The country’s reliance on foreign imports remains high, with 84% of India’s defense procurement in 2016-20 being of foreign origin. Although defense production is increasingly supported by public sector undertakings and private companies, substantial time and investment will be required before India emerges as a global leader in arms exports.

Moreover, India’s defence industry needs a more robust focus on research and development (R&D) to ensure that it can keep pace with global competitors. The reliance on domestic demand alone is not enough to sustain the sector’s growth, and there is a need to promote investment in both production and R&D, with a long-term focus on innovation and self-reliance.

Another challenge is the need for greater synergy between public and private sector companies. While public sector units like HAL, BEL, and DRDO are leading the charge, the private sector’s role in defense exports needs to expand significantly. Bureaucratic delays, procurement policies, and export clearances also need to be streamlined to accelerate growth.

However, the opportunities are immense. As global demand for cost-effective, technologically advanced defense equipment rises, India has a unique opportunity to fill this niche. The focus on indigenous manufacturing, combined with favorable government policies and growing private sector participation, positions India well for future growth in defense exports.

The Future of India’s Defense Exports

India’s defense industry is poised for substantial growth, with an eye on expanding its global footprint. The government’s focus on indigenization, public-private collaboration, and innovation in defense technologies will continue to play a critical role in achieving its ambitious export targets.

India’s defense exports have the potential to not only boost the economy but also enhance the country’s geopolitical influence. By supplying defense equipment to friendly nations, India can strengthen diplomatic ties and enhance security cooperation.

Countries in Southeast Asia, the Middle East, and Africa are emerging as key markets for Indian defense exports. Nations like the Philippines, Vietnam, Indonesia, and Egypt are exploring partnerships with India for affordable, high-quality military hardware. This growing interest is a testament to India’s success in producing reliable and cost-effective defense solutions.

As India continues its journey towards becoming a global defense exporter, challenges such as increased competition from established arms-exporting nations, bureaucratic hurdles, and the need for further technological advancements must be addressed. However, with the strong policy push and a thriving domestic defense manufacturing sector, India is well-positioned to meet its ambitious export targets and strengthen its presence in the global arms market.

Looking ahead, India’s defense export strategy should focus on continued innovation, developing high-tech solutions, and forging deeper partnerships with countries across the globe. With ambitious export targets and a strong policy framework in place, India is well on its way to becoming a global defense exporter.

Conclusion

India’s defense export trajectory reflects the country’s growing capability and ambition in the defense sector. India’s transition from a defense importer to an emerging exporter is a testament to the country’s growing capabilities in indigenous defense manufacturing. With substantial government support, strategic investments, and a focus on self-reliance, India is not only poised to meet its immediate defense needs but also to become a significant player in the global defense export market.

However, to truly compete with countries like China, India will need to overcome longstanding challenges in production, pricing, and bureaucratic inefficiencies. Successful implementation of the proposed defence export strategies could significantly enhance India’s role as a global defence exporter, while also strengthening its diplomatic relationships and regional security partnerships.

With strategic initiatives, innovative products, and a focus on international partnerships, India is set to become a significant player in the global defense market. The future holds immense promise for India’s defense export sector, as it aims to secure a stronger position on the global stage. As India looks ahead, its defense exports will be a key component in achieving both economic growth and enhanced geopolitical influence