Boosting Indigenisation & Innovation in Defence

• 26 Mar 2025

This editorial is based on “Defence moves to strengthen indigenous production with major procurement approvals” which was published in The Financial Express on 25/03/2025. The article brings into picture the rapid defense modernization under Atma Nirbhar Bharat, with $138 billion in expected orders, rising production, and exports, while highlighting challenges in critical technologies

For Prelims: Defence modernization, Atma Nirbhar Bharat Initiative,  Defence indigenisation, Tejas, Akash missile system, India’s Positive Indigenisation Lists , RudraM-II missile, iDEX ,ADITI,  Defence Testing Infrastructure Scheme, Defence Production and Export Promotion Policy, SRIJAN Portal.  

For Mains: Significance of Defence Indigenisation and Modernisation for India, Key Roadblocks Associated with India's Defence Modernisation and Indigenisation.

India is actively pursuing defence innovation and modernization through its Atma Nirbhar Bharat Initiative, targeting indigenous production and reducing foreign dependence. The defence sector anticipates massive orders totaling $138 billion over the next decade, with significant investments in aerospace, missiles, and artillery. While defence production has more than doubled from Rs 46,429 crore and exports have grown nearly tenfold, challenges remain in developing critical technologies and increasing private sector participation. 

What is the Significance of Defence Indigenisation and Modernisation for India? 

• Strategic Autonomy and National Security: Reducing dependence on foreign arms enhances India’s ability to respond swiftly during crises without being hostage to external suppliers or geopolitical shifts.  
  • Indigenisation ensures that critical platforms are available even during sanctions or supply-chain disruptions.  
  • Modernisation also helps the armed forces remain combat-ready and technologically superior in a volatile neighbourhood.  
  • 65% of defence equipment is domestically manufactured. The ₹7,000 crore order for indigenous ATAGS guns in 2025 reflects this shift toward strategic self-reliance. 
• Economic Growth and Industrial Capability: Defence indigenisation catalyses economic development by creating a robust industrial base, boosting local manufacturing, MSMEs, and start-ups.  
  • It has large multiplier effects through job creation, skill development, and spurring innovation across sectors like aerospace, metallurgy, electronics, and AI. 
  • Defence production rose to ₹1.27 lakh crore in FY24 — a 174% jump from FY15.  
    • Over 16,000 MSMEs and 430 licensed companies are currently engaged in India’s defence production ecosystem. 
• Export Potential and Global Defence Diplomacy: India’s defence exports are emerging as a key pillar of its strategic influence, improving soft power and bilateral defence cooperation.  
  • Indigenous platforms like the Tejas, Akash missile system, and fast interceptor boats are attracting global interest, supporting economic and strategic ambitions. 
  • Defence exports hit an all-time high of ₹21,083 crore in FY24, up from ₹686 crore in FY14- a 30-fold increase.  
    • India now exports to 100+ countries, with the USA and Armenia. 
• Resilience Against Supply Chain Shocks: Building indigenous capabilities reduces vulnerability to global supply chain disruptions, sanctions, or political uncertainty — as seen during the Russia-Ukraine war.  
  • This resilience is vital for uninterrupted military readiness and spares support. 
  • India’s Positive Indigenisation Lists now cover over 5,500 items, of which 3,000+ have been indigenised.  
• Technological Innovation and R&D Ecosystem: Indigenisation fosters a homegrown defence R&D ecosystem, helping India become a producer of cutting-edge tech rather than a passive consumer.  
  • Platforms like iDEX and ADITI bridge military needs with start-up and academic innovation, driving breakthroughs in AI, autonomous systems, and quantum tech. 
  • As of Feb 2025, 619 startups/MSMEs are engaged through iDEX, with ₹449.62 crore allocated.  
    • Innovations like the RudraM-II missile, Naval Anti-Ship Missile, and QKD systems were showcased at SAMARTHYA 2025. 
• Inclusive Development and Regional Industrialisation: Defence corridors and manufacturing clusters drive domino effect and decentralised growth, especially in underdeveloped regions.  
  • This spurs regional employment, local entrepreneurship, and investment in Tier-2 and Tier-3 cities. 
  • Over ₹8,658 crore invested in UP and TN Defence Corridors; 253 MoUs signed worth ₹53,439 crore. Key nodes like Lucknow, Coimbatore, and Hosur are fast emerging as defence hubs.

What are the Key Roadblocks Associated with India's Defence Modernisation and Indigenisation? 

• Technological Gaps in Critical Defence Components: India continues to face significant shortfalls in developing core technologies such as engines, semiconductors, and precision electronics, making it reliant on foreign suppliers for key subsystems. 
  • Despite growing domestic capabilities, strategic platforms like fighter jet engines, AESA radars, and heavy-lift transport systems still require foreign collaboration.  
    • This hampers full-spectrum indigenisation and delays complex defence projects. 
  • India still lacks indigenous aero-engine technology for fighter aircraft; jet engines for Tejas are sourced from GE Aerospace(USA).  
• Low Private Sector Participation and Scale: Private industry’s involvement in defence production remains limited in scale and scope, especially in high-value or complex systems.  
  • Barriers include long gestation periods, uncertainty in procurement pipelines, limited access to R&D support, and risk-averse bureaucratic processes.  
    • This undermines innovation and competition. 
  • Private firms contributed only 21% to total defence production and innovation. Of the ₹1.27 lakh crore of defence production, DPSUs dominate the major share.  
• Bureaucratic Delays and Complex Procurement Procedures: Cumbersome acquisition processes, multiple approval layers, and lack of time-bound decision-making often derail or delay modernisation efforts.  
  • This affects operational readiness and erodes industry confidence in investing in long-term capability development. 
  • Despite reforms, capital acquisition timelines remain long; the new DAC guidelines aim to reduce procurement timelines but its implementation, however, will be tested by time. 
    • For instance, the LCA program was sanctioned in 1983, but the aircraft's first prototype took flight only in 2001, and it has taken until now to take full shape. 
• Inadequate Defence R&D Investment and Absorption: Though DRDO and other agencies have developed indigenous platforms, R&D spending remains low as a percentage of GDP, and there’s a disconnect between lab-level innovation and large-scale production.  
  • India spends around 0.7% of GDP on R&D overall, and much less on defence R&D compared to countries like the US.  
  • Technology Development Fund scheme funds were increased to ₹50 crore per project only recently in FY25, showing earlier underfunding. 
• Import Dependency for Strategic Equipment: Despite improvements, India still imports crucial systems such as submarines, fighter jets, air defence systems, and drones.  
  • This exposes vulnerabilities during geopolitical crises and contradicts the Atma Nirbhar Bharat objective. 
  • According to a recent report by SIPRI, India remains the world's top arms importer, with a 4.7% increase in imports. Russia is its main supplier 
• Testing Infrastructure and Certification Bottlenecks: Lack of adequate testing and certification facilities slows down the production and fielding of indigenously developed systems.  
  • New technologies need faster validation cycles, which are limited by the current testing infrastructure. 
  • The Defence Testing Infrastructure Scheme (DTIS) envisaged setting up of 6-8 Greenfield Defence Testing Infrastructure facilities, despite the growing need in areas like UAVs, EW, and electro-optics. The pace of testing does not match the rise in iDEX or Make-I projects.

What are the Key Government Initiatives Related to Defence Modernisation and Indigenisation?

• Make in India (Defence): Launched in 2014 to promote domestic manufacturing of defence equipment. 
  • Focuses on reducing import dependency and encouraging indigenous production. 
• Defence Acquisition Procedure (DAP) 2020: Introduced categories like Buy Indian (IDDM) and Buy Global–Manufacture in India. 
  • Prioritises domestic procurement with mandatory indigenous content thresholds. 
• Defence Production and Export Promotion Policy (DPEPP) 2020: Targets ₹1.75 lakh crore turnover and ₹35,000 crore exports by 2025. 
  • Aims to develop a robust defence industrial ecosystem, including exports. 
• Innovations for Defence Excellence (iDEX): Encourages start-ups and MSMEs to innovate for defence needs. 
  • Offers grants and procurement support; over 600 startups engaged as of 2025. 
• Technology Development Fund (TDF): Run by DRDO to support MSMEs and startups for developing defence technologies. 
  • Funding limit raised to ₹50 crore per project in FY25. 
• SRIJAN Portal: Online platform listing imported items for indigenisation by Indian industry. 
  • Over 14,000 items indigenised till February 2025. 
• Positive Indigenisation Lists (PILs): Five lists issued banning import of over 5,500 items beyond set deadlines. 
  • Enforced to ensure procurement only from domestic sources. 
• Defence Industrial Corridors (UP & Tamil Nadu): Special manufacturing zones with infrastructure and incentives for defence firms. 
  • ₹53,439 crore investment potential; over ₹8,600 crore already invested. 

What Measures can India Adopt to Enhance Defence Indigeniston and Modernisation? 

• Strengthen Defence R&D and Technology Ecosystem: India must substantially boost investment in defence R&D by incentivising joint research between DRDO, private firms, academia, and start-ups.  
  • Establishing dedicated Defence Technology Incubation Hubs across industrial corridors can nurture innovation.  
  • Focus should shift towards cutting-edge domains like AI, hypersonics, directed energy weapons, and stealth tech.  
  • Faster commercialisation of lab-developed technologies through public-private partnerships is essential.  
    • This will bridge the gap between innovation and deployment in battlefield conditions. 
• Deepen Private Sector and MSME Integration: There is a need to streamline defence procurement frameworks to ensure greater predictability and visibility of orders for private players and MSMEs.  
  • Earmarking procurement quotas specifically for indigenous private firms, especially in Tier-2 and Tier-3 cities, will decentralize manufacturing.  
  • Ensuring faster payments, single-window clearances, and simpler compliance will enhance MSME participation.  
  • Dedicated support cells within MoD should assist MSMEs in certification and technical processes. This will unlock grassroots innovation and build a wider supply chain network. 
• Accelerate Defence Acquisition Reforms: Procurement timelines must be drastically compressed through integrated project teams and digital monitoring tools under the Defence Acquisition Procedure (DAP).  
  • DAC and CCS approvals should follow a fixed calendar to avoid strategic delays. Strengthening lifecycle costing, indigenisation index, and Make-I/II/III categories will improve procurement quality.  
  • Institutionalising feedback loops between users, developers, and decision-makers can ensure outcome-driven modernisation.  
• Enhance Testing, Trials, and Certification Infrastructure: India must rapidly scale up and modernise testing and certification facilities, especially for UAVs, AI-driven platforms, electronic warfare, and high-end communication systems.  
  • A public-private partnership model can be adopted to create dual-use testing facilities in Defence Corridors.  
  • Fast-track certification mechanisms, guided by realistic military requirements, should replace the one-size-fits-all approach.  
• Create Long-Term Strategic Partnerships with Global Original Equipment Manufacturers: Rather than stopgap technology transfers, India should pursue strategic co-development and joint production partnerships in emerging domains. 
  • Defence diplomacy must integrate technology tie-ups with like-minded nations under Quad, I2U2, or bilateral formats.  
  • India can leverage its large defence market as a strategic bargaining chip for ToT and IP sharing.  
    • This approach will indigenise technology, not just assembly lines. 
• Institutionalise Indigenisation through Monitoring and Indices: A real-time Defence Indigenisation Dashboard should track targets, localisation levels, and bottlenecks across all major procurement contracts.  
  • Ministries must be held accountable to periodic indigenisation targets under the Defence Production and Export Promotion Policy (DPEPP).  
  • An Indigenisation Performance Index (IPI) can incentivise stakeholders across services and industry. This will introduce transparency, accountability, and measurable outcomes into the indigenisation process. 

Conclusion:  

India’s push for defence indigenisation and modernisation is vital for achieving strategic autonomy, economic growth, and global defence leadership. Addressing underlying issues through enhanced R&D, streamlined acquisition, and deeper industry collaboration will be key to sustaining momentum. A robust, self-reliant defence ecosystem will not only strengthen national security but also position India as a global hub for military innovation and exports. 

Drishti Mains Question:

Discuss the significance of India's growing defence exports in shaping its strategic autonomy and global influence. 

UPSC Civil Services Examination, Previous Year Questions (PYQs)   

Prelims

Q. What is “Terminal High Altitude Area Defense (THAAD)”, sometimes seen in the news? (2018)   

(a) An Israeli radar system   

(b) India’s indigenous anti-missile programme   

(c) An American anti-missile system   

(d) A defence collaboration between Japan and South Korea.   

Ans: (c)

Q. In the context of the Indian defence, what is ‘Dhruv’? (2008)

(a) Aircraft-carrying warship   

(b) Missile-carrying submarine   

(c) Advanced light helicopter   

(d) Intercontinental ballistic missile   

Ans: (c)

Mains

Q. Foreign Direct Investment (FDI) in the defence sector is now set to be liberalized: What influence this is expected to have on Indian defence and economy in the short and long run? (2014)