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Internal SecurityFree till Sep 9

India's Defence Exports: Policy and Progress

July 19, 2026

India's Defence Exports: Policy and Progress

Introduction

India is transitioning from being one of the world's largest defence importers to a defence manufacturing and export hub. Driven by the Make in India initiative, policy reforms (Defence Procurement Procedure, Defence Production and Export Promotion Policy), and geopolitical shifts, India's defence exports have seen remarkable growth — from ₹1,942 crore (2014-15) to ₹21,083 crore (2023-24) — a tenfold increase in a decade.

The Strategic Rationale

Why Defence Exports Matter

  1. Foreign policy tool: Enhances strategic partnerships and diplomatic influence
  2. Economies of scale: Larger production runs reduce per-unit cost for domestic forces
  3. Self-reliance: Export revenue funds R&D and production capacity
  4. Job creation: Defence manufacturing employs ~1.5 million people (direct + indirect)
  5. Technology development: Export-led competition drives innovation
  6. Geopolitical leverage: Reducing import dependence strengthens strategic autonomy

India's Defence Import Legacy

  • India was world's 2nd largest arms importer (after Saudi Arabia) — SIPRI data
  • Import dependence: 55-60% of defence equipment imported
  • Major suppliers: Russia (49%), France (14%), Israel (9%), USA (8%) — as of 2023
  • The goal: Reduce import bill while increasing exports to achieve favourable trade balance

Policy Framework

Defence Production and Export Promotion Policy (DPEPP) 2020

  • Target: Defence production worth ₹1,75,000 crore ($21 billion) by 2025
  • Export target: ₹35,000 crore ($5 billion) by 2025
  • Key features:
    • Separate budget for defence R&D
    • R&D grants to MSMEs and start-ups
    • Innovation ecosystem (iDEX, TDF, DRDO industry partnerships)

Defence Procurement Procedure (DPP) Reforms

ReformImpact on Exports
Indigenisation lists (positive lists of 509 items)Creates domestic demand → production base → export surplus

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Offset obligations
Foreign OEMs invest in Indian supply chain → export capability
Streamlined licensingIndustrial licence validity extended (15 years) for defence manufacturing
FDI liberalization74% automatic, up to 100% government route

SCOMET Policy

  • SCOMET: Special Chemicals, Organisms, Materials, Equipment and Technologies
  • Dual-use export controls — balanced between non-proliferation and export promotion
  • Eased licensing for friendly countries
  • India's membership in Wassenaar Arrangement (2017) eased high-tech exports

Defence Export Performance

Growth Trajectory

YearDefence Exports (₹ crore)Growth
2014-151,942—
2016-171,522Decline (policy transition)
2018-1910,7465× in 4 years
2020-218,434COVID impact
2021-2212,814Recovery
2022-2316,000Continued growth
2023-2421,083All-time high (986% since 2014)

Export Destinations (Top 10)

CountryEquipment Type
USAAircraft components, radars
ArmeniaPinaka rockets, Swathi radars (during Nagorno-Karabakh)
FranceAircraft components (through OEM contracts)
MaldivesFast patrol boats, naval assets
Sri LankaOffshore patrol vessels, small arms
BangladeshSmall arms, ammunition, naval craft
MyanmarArtillery, radar systems (controversial due to human rights concerns)
UAEAerospace components, missiles
SeychellesNaval surveillance, coastal radar
MauritiusFast patrol vessels, Dornier aircraft

Key Export Items

  1. Aerospace: AL-31FP engines (for Su-30), aircraft structural components, HAL Dhruv (helicopter)
  2. Naval: Offshore patrol vessels, fast interceptor craft, landing craft
  3. Ordnance: Artillery shells, Pinaka rockets, small arms (INSAS, pistols)
  4. Radars: Swathi weapon locating radar, battlefield surveillance radar
  5. Missiles: Brahmos (joint venture with Russia — exported to Philippines), Akash (interest from SE Asia)
  6. Drones: Nishant, Rustom (limited; but growing export interest)

Major Export Contracts

Brahmos Missile to Philippines (2022)

  • Value: ₹2,500 crore ($375 million)
  • Significance: First major missile export — shore-based anti-ship variant
  • Implication: Validation of India's missile export capability
  • Follow-up: Indonesian and Vietnamese interest

Akash Missile System (Export Interest)

  • Interest from: Malaysia, Philippines, Vietnam
  • Competitive edge: Cost-effective (40-50% cheaper than US/Israeli equivalents)
  • Status: Under negotiation

HAL Dhruv (Helicopter Exports)

  • Countries: Ecuador (operational issues — grounding), Nepal, Maldives, Mauritius, Suriname
  • Export challenges: Ecuador grounding dented reputation; recovery ongoing with new Mk-III variant

Pinaka Rocket System to Armenia (2022)

  • Value: ₹1,600-2,000 crore
  • Context: Armenia-Azerbaijan conflict; India emerged as key defence partner for Armenia
  • Accompanying: Swathi radars, anti-tank missiles

Challenges

ChallengeDetails
Quality perceptionIndian equipment seen as less reliable (DRDO delays, HAL production issues)
After-sales serviceWeak spares, maintenance, and training support
R&D gapsPrivate sector R&D limited; DRDO dominated (4,000+ scientists but low out-of-box innovation)
Export controlsSCOMET licensing, end-user verification, and US sanctions threats (CAATSA)
Geopolitical constraintsRussia overhang; Ukraine war affecting Russia-linked supply chains
Private sector reluctanceLimited participation due to small order quantities, delayed payments, complex offsets
Domestic demand priorityIndian forces have priority — export orders face capacity constraints
Defence attaché networkWeak commercial diplomacy compared to US, France, Israel
CompetitionPrice competition from China, Turkey, South Korea
FinancingLack of EXIM Bank-backed buyer's credit for defence purchases

Success Stories

iDEX (Innovations for Defence Excellence)

  • Launch: 2018
  • Purpose: Engage MSMEs and start-ups in defence innovation
  • Achievements: 350+ start-ups onboarded; 250+ contracts; solutions in AI, drones, cybersecurity
  • Notable: "Dare to Dream" competition for defence innovation

Private Sector Contributions

  • Tata Group: Howitzer guns (from BAE), aircraft structures, passenger-to-freight conversion
  • L&T: Naval shipbuilding, missile systems, artillery
  • Bharat Forge: Artillery guns, vehicle components
  • Kalyani Group: Advanced armour, ammunition

Way Forward

  1. Service orientation: Establish MRO hubs for Indian-origin equipment abroad
  2. Export financing: Increase EXIM Bank lines for defence buyers
  3. Streamlined SCOMET: Faster approvals for trusted partners
  4. Second-hand equipment: Export surplus equipment (naval ships, aircraft) to friendly countries
  5. Government-to-Government (G2G) framework: Leverage diplomatic relations for defence deals
  6. Offset reform: Move from direct offsets to "Make in India" linked exports
  7. BRICS+ outreach: Defence exports as part of South-South cooperation

Conclusion

India's defence export story is remarkable but still in early stages. A tenfold increase in a decade is impressive, but from a low base. With policy reforms, private sector entry, and successful platforms like Brahmos, the foundation is strong. However, achieving the $5 billion target requires addressing quality perception, after-sales service, and export financing gaps. Defence exports are not just economics — they are strategic tools of foreign policy and should be managed as such.

Practice Questions

  1. Discuss the growth of India's defence exports since 2014. What policy reforms have driven this growth?
  2. "Defence exports are a tool of strategic diplomacy." Critically examine with reference to India.
  3. What are the challenges in India's defence export ambitions? Suggest a roadmap for achieving $5 billion exports.