India’s private defence industry is expanding its role in military production, but analysts say significant technological and capability gaps continue to limit its ability to develop advanced weapons systems independently.
According to the defence ministry, private companies accounted for 24 per cent of India’s defence output in the 2025-26 financial year, contributing US$4.4 billion out of a record US$18.7 billion in total production.
The figures reflect a gradual shift in a sector traditionally dominated by state-owned manufacturers, with private firms increasingly involved in producing drones, surveillance systems, ammunition and various defence components.
Defence Minister Rajnath Singh attributed the record output to sustained policy support, new initiatives, greater private sector participation and expanding export capabilities.
Private firms gaining ground
Despite the progress, analysts noted that private companies are still largely supporting rather than replacing state-owned defence manufacturers.
Research analyst Rahul Wankhede said India’s armed forces require a wide range of capabilities, from basic equipment to sophisticated systems such as aero-engines, advanced sensors, missiles, aircraft and submarines.
He said that in many critical technology areas, India continues to rely on state-owned enterprises, Defence Research and Development Organisation-led programmes, foreign technology partnerships, or a combination of these factors.
India currently has more than 500 licensed defence companies and around 16,000 micro, small and medium-sized enterprises operating within the sector. A total of 134 companies have also registered with the Defence Research and Development Organisation as development and production partners.
Wankhede said private firms would need to invest at least 5 per cent of their revenue in research and development to narrow existing capability gaps.
Ambitious growth targets
CRISIL Ratings projects annual revenue growth of between 15 and 16 per cent for India’s private defence companies by the 2026-27 financial year.
The government has set a long-term goal of increasing private sector participation in defence production to 50 per cent.
Researcher Gaurav Kumar described the current 24 per cent contribution as a significant milestone, saying private firms had moved from the margins of India’s defence ecosystem to a more central role.
He noted that private companies could innovate more rapidly than state-owned enterprises in emerging areas such as drones, autonomous systems and advanced electronics.
India exported US$4.04 billion worth of defence products to more than 80 countries during the 2025-26 financial year. The country is also targeting domestic defence production of US$31.6 billion by 2029 as part of efforts to reduce reliance on imported military equipment.
Technology dependence remains a challenge
Analysts said recent global events have increased the urgency of India’s drive for defence self-reliance.
Strategic studies specialist Vivek Mishra pointed to the Covid-19 pandemic, the war in Europe and recurring Middle East crises as reminders of the risks associated with disrupted supply chains and global instability.
Retired lieutenant-general D.S. Hooda said private companies would play an increasingly important role in driving innovation, particularly in dual-use technologies with both civilian and military applications.
However, he noted that foreign technology transfers could be necessary to help Indian companies scale up more quickly.
Kumar identified dependence on foreign suppliers as one of the sector’s most persistent obstacles, particularly in advanced aero-engines, propulsion systems and high-end sensors.
He said the challenge affects both state-owned and private defence manufacturers, making it a broader issue for India’s defence industry as a whole.
