India’s military self-reliance push hits private sector tech deficit

India’s private defence companies are poised to expand their footprint in the sector, but analysts warn they still lack the technology and capabilities needed to produce cutting-edge weapons for the country’s military or export markets.
In the 2025-26 financial year, the private sector accounted for 24 per cent of India’s defence output, or US$4.4 billion out of a record US$18.7 billion, according to a defence ministry statement released last week.
The figures reflect a gradual shift away from a sector long dominated by state-owned manufacturers, with private firms contributing more to drones, surveillance systems, ammunition and components.
Defence Minister Rajnath Singh hailed the record output on social media, attributing it to “sustained policy support, several new initiatives, increased private sector participation and growing export capabilities”.
Yet the headline numbers do not tell the full story, according to Rahul Wankhede, a research analyst at the Manohar Parrikar Institute for Defence Studies and Analyses in New Delhi, who said private companies were still complementing, rather than displacing, state-owned manufacturers.

“India’s armed forces need everything from basic equipment and components to highly complex systems such as aero-engines, advanced sensors, missiles, aircraft and submarines. In many of these critical technology areas, India still depends either on the public sector, DRDO-led development, foreign technology collaboration or a combination of all three,” he said, adding that it would be premature to suggest private firms could meet the full spectrum of military requirements.
India has more than 500 licensed defence companies and 16,000 micro, small and medium-sized enterprises in the sector, while 134 companies have registered with the state-run Defence Research and Development Organisation (DRDO) as production and development partners.
To close the capability gap, Wankhede said private firms would need to invest at least 5 per cent of revenue in research and development. He also called for a structured system pairing them with public-sector manufacturers, the DRDO, start-ups and suppliers to serve both domestic and export demand.
CRISIL Ratings projects that revenues of India’s private defence companies will grow 15 to 16 per cent annually by the 2026-27 financial year. Delhi has set an eventual target of 50 per cent private-sector participation in defence production.

Gaurav Kumar, a researcher at the United Service Institution of India defence think tank, said the 24 per cent share was a meaningful threshold.
“These are not marginal numbers. They indicate that private firms have moved from the periphery of India’s defence ecosystem to its core.”
He added that in areas such as drones, autonomous systems and advanced electronics – capabilities the military would increasingly require – private companies could innovate faster than state-owned enterprises.
India exported US$4.04 billion of defence products to more than 80 countries in 2025-26 and is targeting US$31.6 billion in domestic production by 2029, as part of a broader drive to shed its long-standing status as one of the world’s largest arms importers.
India’s years-long self-reliance push has acquired fresh urgency following a succession of global shocks, according to Vivek Mishra, deputy director of strategic studies at the Observer Research Foundation think tank.
“The Covid-19 pandemic exposed the fragility of supply chains. The war in Europe demonstrated how quickly a major-power conflict drains munitions stockpiles and successive crises in the Middle East have kept the spectre of disrupted shipping lanes and energy flows in permanent view,” Mishra said.
He also noted that India could not rely on government spending alone to drive the sector forward – unlike China, where the state directed defence investment as a national priority – as Delhi had competing budgetary demands.

D.S. Hooda, a retired lieutenant-general in the Indian Army, said private companies would become increasingly important, particularly in innovation.
“If you look worldwide, it is the private sector that has really contributed the majority of defence innovation and also built up key and better technologies, particularly in dual-use technology,” he said.
For now, however, India’s domestic private sector lacks the scale for a step change in output.
Hooda said foreign companies could accelerate progress by transferring technology to Indian partners, enabling them to scale up within a decade.
Kumar, on the other hand, struck a cautionary note – identifying foreign dependency as the sector’s most stubborn constraint.
“India still depends on foreign suppliers for advanced aero-engines, propulsion technologies and certain high-end sensors,” he said. “This dependency affects both the public sector and the private industry. It is an Indian defence-industrial problem.”