India's defence exports crossing ₹23,000 crore in FY2025-26 — a 60% jump over the previous year — signals a structural shift in India's ambition from being the world's largest arms importer to a credible defence exporter. But ambition and achievement are separated by the quality of the ecosystem, not just the scale of the numbers.
| Indicator | Data |
|---|---|
| Defence export growth (FY2025-26) | >60% over previous year |
| DPSU export growth (FY2025-26) | >150% |
| Countries India exports defence equipment to | 80+ |
| Armenia contract value (Akash SAM + equipment) | ~$2 billion |
| India's defence export target | ₹50,000 crore by 2028-29 |
| South Korea defence export benchmark | Top 10 global exporter within a decade |
| Korea Aerospace Industries — government equity | 26% (via national Exim Bank) |
| India's defence import status (historically) | World's largest arms importer |
Background & Context
India's defence export push is embedded within a broader policy architecture:
- Atmanirbhar Bharat — self-reliance in defence manufacturing as a national security and economic imperative
- Positive Indigenisation Lists — phased ban on imports of specified defence items to force domestic manufacturing
- Defence Acquisition Procedure (DAP) 2020 — preference to domestically manufactured equipment
- iDEX (Innovations for Defence Excellence) — startup integration into defence supply chains
- Two dedicated Defence Industrial Corridors — Uttar Pradesh and Tamil Nadu
The global environment is also favourable: defence budgets are rising worldwide, supply chains from Russia and Western nations are strained by ongoing conflicts, and many nations seek affordable, accessible, and politically non-conditional defence partnerships.
What Drove FY2025-26 Growth: An Honest Assessment
| Driver | Assessment |
|---|---|
| DPSU performance | Genuinely commendable — 150%+ growth |
| Armenia contract (Akash SAM, rocket launchers, howitzers) | ~$2 billion — significant but geopolitically specific and non-replicable |
| Breadth of export destinations | 80+ countries — positive signal for diversification |
| Private sector contribution | Still limited — DPSUs dominate |
The Armenia Factor — Why It Cannot Be the Template:
Armenia's procurement from India is driven by a unique geopolitical constellation:
- Threatened by Azerbaijan, backed by Turkiye (a major affordable arms producer)
- Seeks to diversify away from Russia — which is seen as dangerously expansionist
- Has fewer buyer options than most nations
This demonstrates that defence contracts follow geopolitical alignments — India must build relationships, not just products, to replicate such deals.
The Private Sector Imperative
The most structurally important argument in India's defence export debate:
| Dimension | Current Reality | Required Shift |
|---|---|---|
| Who leads exports | DPSUs dominate | Private sector must become engine of growth |
| Platform orders | Government orders primarily to DPSUs | Private sector must receive complete platform orders |
| Startup integration | Fragmented; peripheral to supply chains | Must be integrated into DPSU-led supply chains |
| Global industry interest | High interest in Indian startups' innovation | Must be channelled into scalable partnerships |
South Korea: The Model to Study
| Feature | Korea Aerospace Industries (KAI) | Hanwha Group |
|---|---|---|
| Ownership | 26% government (Exim Bank) + private | Family-run conglomerate |
| Model | Public-private hybrid | Fully private |
| Outcome | K2 tanks, K9 howitzers, FA-50 jets exported globally | Competitive price-point, high-volume exports |
South Korea's success rests on trusted public-private partnership — government provides strategic direction and partial ownership; private sector drives innovation, efficiency, and competitive pricing.
The Twin Strategic Purposes of Defence Production Policy
| Purpose | Rationale |
|---|---|
| 1. Domestic defence-industrial base at scale | Recent history (Ukraine, Gaza, Taiwan Strait tensions) confirms that import dependence cannot substitute domestic manufacturing capacity — supply chains break under war conditions |
| 2. Integration with global markets as geopolitical leverage | Defence relationships create bilateral and plurilateral ties; they are a tool of statecraft, not merely commerce |
Challenges and Structural Gaps
- DPSU dominance: Public sector units still crowd out private players in procurement and export pipeline
- Startup-to-scale gap: iDEX has produced innovation but the pathway from startup to integrated supply chain partner remains poorly institutionalised
- Quality and reliability perception: India must overcome buyer hesitancy about after-sales support, spares availability, and platform reliability — areas where Western and Russian suppliers have decades of track record
- Geopolitical conditionality: India's strategic autonomy doctrine means it will not align with blocs — a double-edged sword in defence exports (reassures some buyers; limits access to others)
- Technology depth: India still imports critical subsystems — engines, sensors, avionics — limiting the indigenous value content of "Indian" exports
- Offset implementation: India's own offset policy (requiring foreign vendors to invest in Indian defence industry) has underperformed — a domestic lesson for outbound export strategy
Conclusion
India's defence export surge is real, significant, and strategically well-timed. But sustainable growth cannot rest on exceptional contracts from geopolitically isolated buyers or DPSU-driven pipelines alone. The private sector — from large conglomerates to defence startups — must be trusted with complete platform orders and integrated into supply chains. India must also recognise that defence exports are not merely a commercial opportunity but a geopolitical instrument — each export relationship is a tie that binds, a lever that stabilises. Building a defence-industrial complex at scale is ultimately a question of national power, not just export revenue.