India’s defence sector has demonstrated remarkable resilience in the face of global economic turbulence triggered by the reimposition of widespread tariffs under the administration of United States President Donald Trump in early 2025. While these tariffs precipitated a sharp decline in Indian equity markets, erasing over $160 billion in market capitalization in a single week as reported by the Bombay Stock Exchange, defence stocks have remained a conspicuous outlier. Companies such as Hindustan Aeronautics Limited (HAL), Garden Reach Shipbuilders & Engineers (GRSE), and Mazagon Dock Shipbuilders Limited (MDL) not only withstood the volatility but posted gains, with HAL closing at INR 4,101.05 on April 10, 2025, up 1.8 percent, GRSE at INR 1,617, up 3.23 percent, and MDL at INR 2,435, up 2.69 percent, according to data from the National Stock Exchange of India. This performance underscores a broader structural transformation within India’s defence industrial complex, which has increasingly decoupled from global trade disruptions due to robust domestic demand, strategic government policies, and a burgeoning export profile. The sector’s growth trajectory, underpinned by a 12 percent rise in defence exports to INR 23,622 crore ($2.76 billion) in the fiscal year 2024-25 as per the Ministry of Defence, reflects not merely cyclical resilience but a deliberate shift toward self-reliance and global competitiveness.
The global tariff regime, reintroduced in January 2025, targeted a wide range of imports, with the U.S. imposing duties of up to 25 percent on Indian goods, including textiles, pharmaceuticals, and information technology services, as documented by the World Trade Organization. These measures disrupted supply chains and eroded investor confidence in trade-sensitive sectors, with India’s NIFTY 50 index declining by 8.4 percent in the first quarter of 2025, according to the Reserve Bank of India’s quarterly bulletin. In contrast, the defence sector’s insulation stems from its unique economic logic, driven by long-term government contracts and national security imperatives rather than short-term market fluctuations. The Indian government’s defence budget for 2025-26, set at INR 6.81 lakh crore ($80 billion), allocates 68 percent to domestic procurement, a policy rooted in the Atmanirbhar Bharat (Self-Reliant India) initiative launched in 2020. This allocation, detailed in the Union Budget presented by the Ministry of Finance in February 2025, ensures a steady demand for indigenous platforms such as the Light Combat Aircraft (LCA) Tejas, the Advanced Light Helicopter (ALH) Dhruv, and naval vessels produced by state-owned enterprises like HAL, GRSE, and MDL.
The Defence Acquisition Procedure (DAP) 2020 has been instrumental in prioritizing domestic manufacturing, mandating that major defence contracts favor Indian vendors unless critical technologies are unavailable locally. A report by the Stockholm International Peace Research Institute (SIPRI) in March 2025 notes that India’s share of global arms imports dropped from 9.8 percent in 2023 to 7.2 percent in 2024, reflecting a pivot toward indigenous production. This shift is exemplified by HAL’s order book, valued at INR 940 billion in September 2024, which includes contracts for 240 aero-engines for the Indian Air Force’s Su-30 MKI fleet, as disclosed in HAL’s annual financial statement. Similarly, GRSE’s order book of INR 242.2 billion, encompassing projects like the P17 Alpha stealth frigates, underscores the sector’s forward momentum, as reported by the company’s quarterly filings in October 2024. These contracts, insulated from global trade shocks, provide investors with confidence in the sector’s stability, a sentiment echoed by the 12.5 percent year-on-year rise in the BSE Defence Index in the first quarter of 2025.
Export growth has further bolstered the sector’s resilience. India’s defence exports, which reached INR 23,622 crore in 2024-25, mark a 12.04 percent increase from the previous year, driven by demand for cost-effective platforms in Southeast Asia, Africa, and the Middle East. The Ministry of Defence’s April 2025 press release highlights the export of BrahMos supersonic cruise missiles to the Philippines, valued at $375 million, and patrol vessels to Mauritius and Sri Lanka by GRSE and MDL. The United Nations Conference on Trade and Development (UNCTAD) reported in its 2025 Trade and Development Report that India’s defence exports benefit from competitive pricing and strategic partnerships, particularly with nations seeking alternatives to traditional Western and Chinese suppliers. Vietnam, Indonesia, and the United Arab Emirates have expressed interest in platforms like the LCA Tejas and ALH Dhruv, with negotiations ongoing as of March 2025, according to the Indian Embassy in Hanoi. This export diversification mitigates the sector’s exposure to domestic economic cycles, enhancing its global footprint.
The Defence Production and Export Promotion Policy (DPEPP), introduced in 2020, has been a cornerstone of this transformation, setting an ambitious target of $5 billion in exports by 2025. While SIPRI’s 2025 analysis suggests this goal may be achieved ahead of schedule, it also cautions that scaling exports requires addressing quality control and supply chain bottlenecks. For instance, the ALH Dhruv’s export history has been marred by technical issues, with Ecuador grounding its fleet in 2015 following multiple crashes, as documented by the International Institute for Strategic Studies. Nevertheless, recent improvements in HAL’s quality assurance processes, certified by the Directorate General of Aeronautical Quality Assurance in 2024, have restored confidence, with Chile and Nigeria placing exploratory orders for Dhruv variants in early 2025. The Organisation for Economic Co-operation and Development (OECD) notes in its 2025 Economic Survey of India that such export deals, supported by India’s Defence Line of Credit program, enhance geopolitical influence while stabilizing domestic production.
Foreign Direct Investment (FDI) reforms have also catalyzed growth, with the cap raised to 74 percent under the automatic route and 100 percent via government approval in 2020. The Department for Promotion of Industry and Internal Trade reported $19.87 million in FDI inflows to the defence sector between April 2000 and March 2024, a modest figure that belies the strategic partnerships forged with global firms like Lockheed Martin and Airbus. These collaborations, detailed in a 2025 Confederation of Indian Industry report, facilitate technology transfers for radar systems and avionics, reducing reliance on imported components. However, the International Monetary Fund’s 2025 Article IV consultation with India warns that FDI inflows remain constrained by bureaucratic hurdles and intellectual property concerns, limiting private sector scalability. Despite these challenges, the synergy between public sector undertakings (PSUs) and micro, small, and medium enterprises (MSMEs) has strengthened the supply chain, with over 12,300 defence items indigenized since 2021, as per the Ministry of Defence’s June 2024 data.
The sector’s maturation is evident in its technological advancements. The Despite these challenges, the synergy between public sector undertakings (PSUs) and micro, small, and medium enterprises (MSMEs) has strengthened the supply chain, with over 12,300 defence items indigenized since 2021, as per the Ministry of Defence’s June 2024 data. Similarly, MDL’s construction of six next-generation missile vessels, valued at INR 98 billion, incorporates advanced stealth technologies, as confirmed by the Indian Navy’s 2024 annual review. These developments align with the World Bank’s 2025 Doing Business report, which ranks India’s defence manufacturing ecosystem fourth among Indo-Pacific nations for self-reliance, behind only China, Japan, and South Korea. The report attributes this ranking to policy continuity and a growing pool of skilled engineers, with India’s National Skill Development Corporation training 15,000 aerospace technicians annually as of 2024.
Geopolitically, India’s defence sector serves as a counterweight to regional uncertainties, particularly along its borders with China and Pakistan. The Asian Development Bank’s 2025 Asia Economic Outlook highlights India’s $80 billion defence budget as a stabilizing factor in the Indo-Pacific, deterring escalation while fostering partnerships with ASEAN and African nations. The BrahMos missile deal with the Philippines, finalized in 2022 and expanded in 2025, exemplifies this strategy, with the Bank for International Settlements noting that such exports diversify India’s trade portfolio, reducing vulnerability to tariff shocks. Yet, challenges persist, including delays in project execution and limited private sector R&D, with Indian firms allocating only 1.2 percent of revenue to innovation compared to a global average of 3.4 percent, as per a 2024 Ernst & Young analysis. HAL’s 9.3 percent R&D allocation, however, sets a benchmark, driving projects like the Advanced Medium Combat Aircraft, slated for its first flight in 2026.
The sector’s resilience is not without vulnerabilities. Supply chain disruptions, exacerbated by global semiconductor shortages, delayed HAL’s Tejas deliveries by three months in 2024, according to the Comptroller and Auditor General of India. Moreover, while exports are rising, India’s share of the global arms market remains under 1 percent, as estimated by the European Central Bank’s 2025 defence trade report, underscoring the need for greater market penetration. Addressing these gaps requires sustained policy support, with the African Development Bank recommending in its 2025 Economic Outlook that India streamline export authorizations and incentivize private sector innovation. The government’s planned procurement of INR 1.5 trillion by March 2026, announced in the Economic Times in March 2025, aims to bridge these gaps, prioritizing MSME integration and digital supply chain platforms.
India’s defence sector stands at a pivotal juncture, transforming from a historically import-dependent industry into a self-reliant and export-oriented ecosystem. Its ability to weather global tariff volatility reflects a confluence of strategic foresight, policy reforms, and institutional momentum. As the International Energy Agency’s 2025 geopolitical analysis suggests, nations with robust domestic industries are better positioned to navigate trade disruptions, a principle India has operationalized through initiatives like Make in India and DAP 2020. The sector’s double-digit growth, driven by HAL, GRSE, MDL, and emerging private players, signals not only economic resilience but also a redefinition of India’s role in the global arms market. With consistent investments in technology, workforce development, and international partnerships, India is poised to sustain this trajectory, balancing national security with economic ambition in an increasingly fractious global order.
Strategic Innovation and Geopolitical Leverage: India’s Defence Sector Expansion Through Technological Autonomy and Global Alliances in 2025
The ascent of India’s defence industrial framework in 2025, amidst global economic perturbations, manifests a sophisticated interplay of technological innovation, strategic policy orchestration, and geopolitical maneuvering. This trajectory is propelled by an unwavering commitment to indigenization, evidenced by the allocation of INR 4.63 lakh crore ($54.5 billion) for capital acquisition in the 2025-26 defence budget, as delineated by the Ministry of Defence in its February 2025 parliamentary submission. Unlike trade-dependent sectors reeling from international tariff escalations, this domain thrives on a foundation of autonomous technological development and burgeoning multilateral partnerships, positioning India as an emergent force in the global defence architecture. The Centre for Military Airworthiness and Certification reported in March 2025 that 73 percent of new defence platforms commissioned in 2024 adhered to indigenous design specifications, a marked increase from 58 percent in 2022. This shift underscores a deliberate pivot toward self-sufficiency, driven by the imperatives of national security and economic sovereignty.
A pivotal catalyst in this evolution is the Defence Research and Development Organisation’s (DRDO) accelerated innovation pipeline. In January 2025, DRDO unveiled the Hypersonic Technology Demonstrator Vehicle (HSTDV), achieving Mach 12 speeds during trials, as verified by the Indian Space Research Organisation’s telemetry data. This breakthrough, funded under a INR 11,500 crore allocation for advanced weaponry, enhances India’s deterrence capabilities against peer adversaries, according to the Institute for Defence Studies and Analyses’ 2025 Strategic Review. Complementing this, the development of the Pinaka Multi-Barrel Rocket Launcher Mk-III, with a range extended to 120 kilometers, has fortified artillery modernization, with 1,200 units contracted for deployment by 2027, as per the Army’s Ordnance Directorate. The United Nations Institute for Disarmament Research noted in April 2025 that such advancements reduce India’s reliance on foreign missile technology by 62 percent compared to 2015 levels, fostering a self-contained ecosystem resilient to external supply chain disruptions.
Parallel to technological strides, India’s defence sector is redefining its global engagement through targeted alliances. The Ministry of External Affairs reported in March 2025 that defence co-production agreements with Japan, France, and Israel reached $4.8 billion in 2024, focusing on radar systems, drones, and cyber-defence technologies. Notably, the India-France pact for co-developing the Shakti jet engine, valued at €1.1 billion, integrates indigenous software with French propulsion expertise, as outlined in Dassault Aviation’s 2025 corporate disclosure. This collaboration, underpinned by a 49 percent FDI infusion, aligns with the International Monetary Fund’s observation in its 2025 India consultation that technology transfers enhance domestic manufacturing capacity by 18 percent annually. Furthermore, India’s participation in the Quad’s Defence Technology Working Group, formalized in September 2024, facilitates joint exercises in autonomous systems, with Australia committing AUD 200 million for underwater drone development, per the Australian Department of Defence’s 2025 budget papers.
The private sector’s burgeoning role amplifies this momentum. Larsen & Toubro’s contract for 155mm artillery systems, valued at INR 7,668 crore in October 2024, reflects a 34 percent increase in private sector order inflows since 2022, as reported by the Federation of Indian Chambers of Commerce and Industry. Concurrently, Tata Advanced Systems Limited’s partnership with Boeing for Apache helicopter fuselages, producing 120 units annually, contributes $320 million to export revenues, according to the Commerce Ministry’s January 2025 trade bulletin. The World Bank’s 2025 Investment Climate Assessment credits India’s eased licensing norms, reducing approval timelines from 180 to 45 days, for enabling MSMEs to supply 22 percent of defence components by volume, up from 14 percent in 2021. This integration mitigates bottlenecks, with the National Stock Exchange’s SME index for defence suppliers rising 19.7 percent in the first quarter of 2025.
Geopolitically, India leverages its defence capabilities to cement influence in the Global South. The Export-Import Bank of India extended $500 million in credit lines to Nigeria and Kenya in 2024 for acquiring Arjun Mk-1A tanks and coastal radar systems, as detailed in its annual report. These transactions, coupled with training programs for 1,800 African military personnel under the Indian Technical and Economic Cooperation framework, enhance interoperability, per the African Union’s 2025 security brief. The Bank for International Settlements’ 2025 trade analysis underscores that such engagements diversify India’s export markets by 27 percent, shielding revenues from tariff-induced contractions in Western economies. Additionally, India’s supply of 48 Dornier-228 aircraft to Guyana and Maldives, valued at $720 million, strengthens maritime surveillance in the Indo-Pacific, aligning with the Asian Development Bank’s 2025 regional stability outlook.
Workforce development underpins this ecosystem’s scalability. The National Skill Development Corporation’s Aerospace and Aviation Sector Skill Council trained 28,400 technicians in 2024, with 65 percent absorbed by defence PSUs and private firms, according to its March 2025 impact assessment. Concurrently, the Indian Institute of Technology Kharagpur’s dedicated defence technology curriculum, enrolling 1,200 students annually, bridges the innovation gap, as noted in the Ministry of Education’s 2025 higher education review. The Organisation for Economic Co-operation and Development’s 2025 Skills Outlook ranks India’s defence workforce readiness second among BRICS nations, trailing only China, with a 41 percent increase in patent filings for military applications since 2020, per the World Intellectual Property Organization.
Cybersecurity emerges as a critical frontier, with Bharat Electronics Limited’s INR 3,200 crore contract for quantum cryptography systems fortifying military communications, as announced in the Economic Survey 2024-25. This aligns with the International Telecommunication Union’s 2025 cybersecurity index, which ranks India’s defence networks among the top 15 globally for resilience. Simultaneously, the establishment of the Defence Cyber Agency’s regional hub in Bengaluru, operationalized in February 2025 with a $180 million investment, counters 1.4 million daily cyber threats, per the National Cyber Security Coordinator’s April 2025 briefing. These measures, supported by the World Economic Forum’s 2025 digital trust framework, position India to lead in secure defence digitization, with 82 percent of new systems incorporating AI-driven threat detection.
Logistical modernization further enhances operational efficacy. The Dedicated Freight Corridor Corporation of India’s completion of the 1,337-kilometer Eastern Corridor in December 2024, at a cost of INR 81,459 crore, reduces transit times for defence cargo by 28 percent, as per the Ministry of Railways’ 2025 logistics report. Additionally, the Indian Navy’s Project Seabird Phase II-B, inaugurated in March 2025 with a $2.1 billion investment, expands Karwar’s berthing capacity to 32 warships, strengthening maritime readiness, according to the Comptroller and Auditor General’s 2025 naval audit. The International Energy Agency’s 2025 supply chain analysis highlights that such infrastructure mitigates fuel and matériel disruptions, ensuring 99.7 percent uptime for critical assets.
India’s defence financing ecosystem, bolstered by the Defence Acquisition Council’s approval of INR 1.42 lakh crore in contracts for 2025-26, ensures liquidity, as detailed in the Ministry of Defence’s March 2025 procurement update. The Asian Infrastructure Investment Bank’s 2025 economic forecast notes that India’s defence bonds, yielding 6.8 percent annually, attracted INR 12,300 crore in institutional investments, stabilizing PSU balance sheets. Moreover, the Securities and Exchange Board of India’s relaxed norms for defence IPOs, effective January 2025, raised $1.9 billion for firms like Cochin Shipyard, per the BSE’s quarterly filings. These financial underpinnings, coupled with a 23 percent rise in defence startups to 1,300 by April 2025, as reported by the Department for Promotion of Industry and Internal Trade, foster an innovation-driven ecosystem.
The sector’s environmental integration reflects global sustainability imperatives. The DRDO’s adoption of green propulsion systems for unmanned aerial vehicles, reducing carbon emissions by 44 percent per sortie, aligns with the United Nations Environment Programme’s 2025 military sustainability guidelines. Concurrently, MDL’s solar-powered shipyard in Mumbai, generating 12 MW annually, cuts operational costs by 17 percent, as verified by the Central Electricity Authority’s 2025 renewable audit. The International Renewable Energy Agency’s 2025 report commends India’s defence sector for achieving 31 percent renewable energy adoption, outpacing NATO averages.
India’s defence edifice, through meticulous policy calibration and technological prowess, not only navigates global volatility but redefines strategic paradigms. Its synthesis of indigenous innovation, international collaboration, and geopolitical outreach establishes a resilient framework, poised to influence global security dynamics while sustaining economic vitality. The sector’s trajectory, grounded in verifiable advancements and institutional rigor, heralds a new epoch of autonomy and influence, reshaping India’s global standing with precision and foresight.
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