Surge in defence budget, PLI scheme, iDEX and more: How Modi govt provided the much needed push to India’s defence manufacturing and drone industry

“Operation Sindoor” which took place in the wake of the Pahalgam terror attack prominently illustrated India’s expanding indigenous military technologies under the “Make in India” program. Domestic equipments, ranging from drones to missiles and air defense systems, proved effective, whereas Turkey and China’s weaponry fell severely short of the expectations.

Notably, The country’s defense manufacturing has increased at a remarkable rate since the “Make in India” campaign kicked off on 25th September 2014 after Prime Minister Narendra Modi stormed to power at the centre. It achieved a historic figure of ₹1.27 lakh crore in the fiscal year 2023-24.

India, which was formerly reliant on foreign suppliers is now a major player in domestic industry and has developed its military capabilities indigenously. This transition demonstrates a firm dedication to self-sufficiency, guaranteeing that India fulfills its security requirements while simultaneously developing a strong defense sector that aids in economic advancement.

This has been propelled by strategic initiatives that promote technological innovation, corporate involvement and the creation of cutting-edge military platforms. The country’s resolve to fortify its military infrastructure is evidenced by the boost in the defense budget which went from ₹2.53 lakh crore in 2013-14 to ₹6.81 lakh crore in 2025-26.

During Financial Year (FY) 2023-24, India’s homegrown defense production soared at the highest rate ever in value terms. This was made possible by Pm Modi’s successful implementation of government policies and programs aimed at achieving Atmanirbharta. Data from all Defence Public Sector Undertakings (DPSUs), other public sector entities that produce defence items and private enterprises showcased that the value of defence output has risen to a new high of ₹1,27,434 crore, representing a staggering 174% increase from ₹46,429 crore in 2014-15.

India’s firm commitment to self-reliance and smart policy initiatives has led to its burgeoning global presence in defense industry. Defense exports have increased 30 times in the last ten years, from ₹686 crore in FY 2013–14 to an all-time high of ₹21,083 crore in FY 2023-24.

The Quantum Key Distribution (QKD) system, the 4G/LTE TAC-LAN, the Advanced Autonomous Systems for the Armed Forces and the Smart Compressed Breathing Apparatus are notable innovations that demonstrate India’s evolving defense environment. The country has already become one of the top exporters of various armaments, with the US as a customer.

Innovations for Defence Excellence (iDEX)

Innovations for Defence Excellence (iDEX), which was established in April 2018, has produced an ideal setting for technological advancement and innovation in the aerospace and defense industries. iDEX has awarded funding of up to ₹1.5 crore for the development of innovative technologies by involving MSMEs (Micro, Small, and Medium Enterprises), startups, individual innovators, R&D (Research and Development) organizations and academics.

₹449.62 crore has been allocated for iDEX under the Defence Innovation Organisation (DIO), including its sub-scheme Acing Development of Innovative Technologies with iDEX (ADITI), for 2025-2026 to further promote self-reliance in defense technology. 430 iDEX contracts have been signed as of February 2025 and 549 problem statements involving 619 startups and MSMEs have been opened.

The government encourages start-ups to contribute to the defense industry and the development of the nation’s aerospace sector by offering large grants, facilitating procurement, facilitating co-creation and co-innovation through the use of efficient operating procedures and little paperwork as well as granting them easier and faster access to test facilities and infrastructure that are available with various government agencies.

PLI Scheme for Drones and Drone Components

The Production-Linked Incentive (PLI) scheme for drones and drone components was authorized by the central government in 2021, marking another step towards achieving the goal of an Aatmanirbhar Bharat. The PLI scheme serves as an extension of the liberalized Drone Rules, 2021, published by the Central Government on 25th August 2021.

Drones provide enormous advantages for practically every industry. Agriculture, mining, infrastructure, emergency response, surveillance, transportation, geospatial mapping, defense, and law enforcement are just a few of them. Their reach, adaptability, and user-friendliness make them potential job and economic growth generators, particularly in India’s inaccessible and rural regions.

The domestically produced drones of India were vital to “Operation Sindoor,” integrating surveillance capabilities with deadly accuracy. The Nagastra-1 and SkyStriker models are two examples of the same. The latter, which was created by Alpha Design, a Bengaluru-based company and Elbit Security Systems, an Israeli firm, especially stood out during the operation.

Moreover, India has the industrial infrastructure to manufacture them on a large scale. India will develop next-generation loitering ammunition and swarm drones when, not if, it has combat success.

According to the ministry of commerce and industry, the PLI initiative aimed to increase domestic manufacturing in 14 key sectors, attracted investments totaling ₹1.61 lakh crore ($18.72 billion) as of November 2024. It generated sales of approximately ₹14 lakh crore ($162.84 billion) against a target of ₹15.52 lakh crore by the end of the fiscal year on 31st March 2025.

India has the potential to become a worldwide drone center by 2030 with its historical advantages in innovation, information technology and cost-effective engineering, coupled with significant domestic demand.

MAKE Projects: Driving Indigenous Defence Innovation

The Defence Procurement Procedure (DPP-2006) featured the MAKE procedure for the first time to encourage domestic design and development in the defense industry. It has been streamlined and simplified throughout time by amendments in 2016, 2018 and 2020. Both the public and commercial sectors are guaranteed to create defense systems, components and equipment far more rapidly. Three categories have been established for these projects:

• MAKE-I (Government Funded): Prototype development can receive up to 70% government financing (up to ₹250 crore per Development Agency). Indigenous Content (IC) must be at least 50%.
• MAKE-II (Industry Funded): It encourages domestic firms to create vital defense systems by emphasizing import substitution. No government financing, but there must be at least 50% Indigenous Content (IC).
• MAKE-III (Manufactured in India through Transfer of Technology – ToT): It entails production in India through Technology Transfer (ToT) from foreign Original Equipment Manufacturers (OEMs). Design and development are not necessary, however at least 60% of the content must be indigenous (IC).

Advancing Self-Reliance

India is now far less reliant on foreign supplies owing to its efforts to become self-sufficient in the defense industry. The nation is creating state-of-the-art military platforms through strategic policies and domestic innovation, enhancing economic growth and national security.

Self-Reliant Initiatives through Joint Action (SRIJAN): It was started in August 2020 by the Department of Defence Production (DDP) as part of Atmanirbhar Bharat to encourage indigenisation. It provides a uniform platform for the Armed Forces (SHQs) and Defence Public Sector Undertakings (DPSUs) to list imported goods for in-country production. More than 14,000 of the more than 38,000 items that are available as of February 2025 have been successfully indigenised.

Positive Indigenisation Lists (PILs): LRUs, assemblies, sub-assemblies, sub-systems, spare parts, components and premium materials are included in the five Positive Indigenization Lists (PILs) released by the Department of Defense Production (DDP) and the Department of Military Affairs (DMA). These lists specify deadlines beyond which domestic manufacturers will no longer be able to purchase.

More than 3,000 of the more than 5,500 products on the list have been indigenized as of February 2025. Armor guns, assault rifles, corvettes, sonar systems, transport planes, light combat helicopters (LCHs), radars, wheeled armored platforms, rockets, explosives, armoured command post vehicles and armoured dozers are some of the vital indigenous technologies.

Defence Industrial Corridors: Tamil Nadu and Uttar Pradesh have established two Defence Industrial Corridors (DICs) to increase defence production. Companies that invest in this sector are given incentives by these corridors.

Over ₹8,658 crore has already been invested in the five Tamil Nadu nodes of Chennai, Coimbatore, Hosur, Salem and Tiruchirappalli, as well as the six Uttar Pradesh nodes of Agra, Aligarh, Chitrakoot, Jhansi, Kanpur and Lucknow. There have been 253 Memorandums of Understanding signed as of February 2025 with an anticipated investment of ₹53,439 crore.

Ease of Doing Business (EoDB): The government has taken a number of steps to make it easier for companies to conduct business in the defense manufacturing industry. The two-year export authorization period for parts and components has been extended until the order or component’s completion, whichever is later.

The Defense Product List was simplified in 2019 to lower the quantity of goods that required a production license. In September 2019, parts and components of defense equipment were delicensed to attract investment. The Industries (Development and Regulation) Act of 1951 raised the duration of defense licenses from three to fifteen years, with the possibility of a further extension of up to eighteen years.

436 businesses in the defense industry have received more than 700 industrial licenses. With over 1,500 approvals granted in the most recent fiscal year, the implementation of an end-to-end digital export authorisation system has increased efficiency.

More important schemes

The Indian government has undertaken several revolutionary projects in recent years with the goal to boost the nation’s capacity for defense manufacturing and attaining self-reliance. These policies aim to improve domestic production, draw in investment and expedite the procurement process. These measures, which range from easing restrictions on foreign direct investment (FDI) to offering preference to domestic manufacturing, demonstrate a strong commitment to bolstering the nation’s defense industrial infrastructure.

The main government programs that have been essential in promoting development and innovation in the defense industry are:

Liberalized FDI Policy: September 2020 witnessed the liberalization of foreign direct investment (FDI) in the defense sector, permitting up to 74% of FDI to flow through the automatic route and more than 74% to go through the government route. The entire amount of foreign direct investment in the defense sector from April 2000 stands at ₹5,516.16 crore.

TATA Aircraft Complex: In October 2024, the Tata Aircraft Complex was opened in Vadodara to produce C-295 aircraft, increasing Atmanirbharta’s defense capabilities with 40 of the 56 aircraft produced under the program being built in India.

Manthan: Leading innovators, startups, MSMEs, academia, investors and industry leaders from the defense and aerospace sectors came together at the annual defence innovation event, Manthan, which was held during Aero India 2025 in Bengaluru. This event served to reinforce trust in the government’s dedication to technological advancements and Aatmanirbhar Bharat.

Defence Testing Infrastructure Scheme (DTIS): With seven test facilities already approved in fields like unmanned aerial systems, electronic warfare, electro-optics and communications, DTIS intends to increase indigenization by offering financial support for the establishment of eight Greenfield testing and certification facilities in the aerospace and defense industry.

Priority for Domestic Procurement: The Defense Acquisition Procedure (DAP)-2020 places a strong emphasis on acquiring capital goods from domestic suppliers.

Domestic Procurement Allocation: During the current fiscal year, the Ministry of Defense has allocated ₹1,11,544 crore, or 75% of the modernization budget, for procurement through local firms.

India showcases its might

The Aero India 2025 event “SAMARTHYA,” which highlighted India’s advancements in defense industry already conveyed the success story of indigenization and innovation in the defense sector. The event presented 33 significant indigenous products, including nine successful iDEX innovation projects and 24 created by the Indian Navy, the Defence Research and Development Organization (DRDO) and Defence Public Sector Undertakings (DPSUs).

The event also showcased innovations in quantum-secure communication technology, next-generation surveillance systems, artificial intelligence-driven analytical platforms and counter-drone tactics.

More importantly, India’s decision to penalize Pakistan for harboring terrorism has further demonstrated the effectiveness of domestically produced weapons in real conflicts. The weapons manufactured in India, in conjunction with joint ventures with companies from Israel and Russia, have proven to be a formidable arsenal in India’s defense.

The munitions production capacity of India revealed itself to be a powerful asset during the operation. The ability to produce a wide range of weapons, including sophisticated missiles and artillery rounds, such the Pinaka rocket launcher, which could fire 72 rockets in 44 seconds, guaranteed continuous supply lines. India’s industrial depth made it a dependable participant in the global arms market, where constant availability is just as important as firepower.

Likewise, the native Akash SAM (Surface-to-Air Missile) was the best parrying weapon, while the Russian S400 served as the blocking defense. India targeted many UAVs and loitering ammo, shot down fighter jets, destroyed a ballistic missile and halted unguided rockets in the same theater. Its capacity to engage multiple targets demonstrated its value in a multi-layered defense grid.

Conclusion

The incredible developments in defense production and exports under the Modi government have enabled this transformation, positioning the country as a self-reliant and globally competitive military manufacturing powerhouse. The nation’s defense capabilities have been greatly enhanced by a combination of strategic policy initiatives, greater domestic engagement and an emphasis on indigenous innovation.

India’s dedication to attaining Atmanirbharta in defense is demonstrated by the explosive growth in exports, the manufacturing boom and the accomplishments of programs like Make in India. With aggressive goals established for 2029, the country is well-positioned to increase its global presence and solidify its standing as a reliable partner in the global defense market, all the while boosting economic growth and national security.

Additionally, the capabilities demonstrated in the recent conflict with Pakistan will not only exemplify India’s strength to the world but also serve as a warning to its adversaries.

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