This is a best prospect industry sector for this country. Includes a market overview and trade data.
Last Published: 10/10/2018


Units: $ millions





2018 (Estimated)

Total Local Production





Total Exports





Total Imports





Imports from the US





Total Market Size





(total market size = (total local production + imports) - exports)

Data Sources: Directorate General of Foreign Trade, Ministry of Defense, Global Trade Atlas

India has the third largest armed forces in the world and plans to spend billions in defense acquisitions over the next several years. According to IHS Jane’s latest annual Defense Budgets report, India is the fourth largest defense spender. Due to an underdeveloped defense manufacturing sector, India is one of the largest importers of conventional defense equipment in the world. According to the Govt of India (GOI), India imports approximately 60 percent of its defense requirements. This makes India’s defense sector one of the most attractive markets globally for both domestic and foreign defense manufacturers.

The defense sector continues to be one of the government’s high priority focus areas. This year’s total allocation for the defense sector is approximately $46.11 billion, which represents a 7.8 percent increase from last year (share of capital expenditure approx. $30 billion exceeds that of revenue approx. $15 billion). The GOI has announced measures to develop two Defense Industrial Corridors in the country. The first corridor is proposed for development in the south Indian state of Tamil Nadu and the second corridor in the north Indian state of Uttar Pradesh. Additionally, the Indian government issued the Defense Production Policy in 2018 to promote public and private sector production, as well as encourage medium and small enterprises participation in defense production. We anticipate significant opportunities for U.S. exporters in the defense sub-sectors.

The Indian defense sector has historically been dominated by state-owned enterprises, known as Defense Public Sector Undertakings (DPSUs) and Ordinance Factory Boards (OFBs). According industry sources, these DPSUs and OFBs contribute 90 percent of the total domestic defense manufacturing output. The GOI began allowing private sector participation in defense manufacturing in 2001. While the Indian DPSUs and private sector suppliers produce combat aircraft, naval vessels, heavy trucks, and other military equipment, they invest little in research and development, resulting in slow development of current or next-generation technologies. As a result, India’s defense industrial base is underdeveloped.

Although India has become one of the world’s top defense importers, the GoI has made it a priority to create a robust defense industrial base under its "Make in India" initiative. For national security reasons, to create jobs in India, and to further develop its overall manufacturing capabilities, Prime Minister Modi announced the "Make in India" initiative in September 2014. Under this initiative, and with continuing privatization efforts, additional large Indian business conglomerates are entering the defense sector. In June 2015, India announced that the DPSUs would no longer receive preferential customs and duties treatment, further encouraging more private sector investment.

In 2016, the Ministry of Defense released the first five chapters of its Defense Procurement Procedure 2016 (DPP-2016), announcing several modifications to institutionalize, streamline, and simplify the procurement procedure to promote India’s defense sector. Other important chapters and various appendices and annexes were released in 2016. The final chapter, which describes the rules and processes for the "Strategic Partnership" model, was released in May 2017. This chapter describes how Indian industry and foreign industry will be selected by the Ministry of Defense to partner with each other in defense subsectors such as fighter aircraft, submarines, helicopters, and armored fighting vehicles.

DPP-2016 prioritized the promotion of indigenously-designed, developed and manufactured defense equipment. Encouraging increased participation of Indian industry, particularly MSME, in the defense sector.

Under the "Make in India" program, there are broadly six procurement categories with the Indigenously Designed Developed and Manufactured category being the most "preferred" acquisition option. The six categories are:

  • Buy (Indian – Indigenously Designed Developed and Manufactured): Direct purchase from an Indian vendor whose products meet Indigenous Content requirements.
  • Buy & Make (Indian): Purchase from an Indian vendor (including an Indian company forming joint venture/establishing production arrangement with OEM), followed by licensed production/indigenous manufacture in the country.
  • Buy (Indian): Direct purchase from Indian vendors whose products meet a minimum indigenous content.
  • Buy & Make: Purchase from a foreign vendor followed by licensed production/indigenous manufacture in the country.
  • Buy (Global): Purchase from foreign or Indian vendors. There is also a "Make" category that can be pursued separately, in sequence or in tandem, with any of the five above categories. Acquisitions in the "Make" category must be designed, developed and manufactured by an Indian vendor. Candidates for this category are selected early in the planning and are therefore prepositioned ahead of all the other categories.
  • Make (Strategic Partnership Model): The details of this category are mentioned under the heading of Opportunities.

With their advanced technology, U.S. OEMs have had increasing success penetrating the market over the past ten years, selling over $14 billion in major systems, including Boeing’s Apache and Chinook helicopters, and Lockheed Martin’s C-130 aircraft. The United States has become one of India’s top three suppliers with Russia and Israel. While U.S. second and third tier suppliers have not had as much success, other non-Indian suppliers do sell parts and components to Indian OEMs.

Leading Sub-Sectors

Land systems: The Future Infantry Combat Vehicle (FICV) program must meet a requirement for over 2,100 vehicles. There will be additional opportunities in field artillery modernization (self-propelled howitzers and fire control systems), small arms and crew-served weapons, and in various munitions, to include surface to air missiles.

Maritime systems: We expect to see more demand for fast patrol craft, while the Indian Navy is also planning to build more submarines and begin construction of a second indigenous aircraft carrier. The Navy also has expanding requirements for fixed and rotary wing aircraft.

Air Systems and Air Defense: There is demand under "Make in India" for co-production of more aircraft. There is also demand for unmanned aerial systems of all sizes and capabilities, along with missiles of various ranges. The Ministry of Defense is pursuing air defense systems and close-in weapon systems to provide point defense against ballistic projectiles, missiles, and other air threats. The Ministry of Defense also hopes to expand and further develop their rotary wing fleets.

Maintenance, Repair, and Operations (MRO): With aging systems in all services and the purchase of more advanced systems, the requirement for more robust MRO capabilities is increasing.

Defense Electronics: The publication company, India Infrastructure, estimates the defense electronics sector will be an estimated $70 billion market in the next 15 years.


With the Indian government’s strong preference for products designed and manufactured in India, it is important that U.S. companies develop a strategy to transition from being an exporter to forming partnerships and strengthening supply chains within India to meet future defense requirements. Future access to the Indian market will be based on meaningful partnerships with local players and strong supply chains with local companies.

Tata and Mahindra already have entered into joint ventures with U.S. defense firms. Reliance Group, Adani, Larsen and Toubro, and Kalyani Group are also major players in the sector. Several major Indian OEMs and tier-two companies seek U.S. suppliers and partners.

The GOI has announced several positive changes in DPP-2016 to encourage participation of foreign OEMs in the Indian market. The new policy has made the process for obtaining industrial licenses substantially easier. DPP-2016 has also introduced enhanced performance parameters, moving from a standard lowest bidder (L1) model to include a cost & technical assessment (L1-T1) model with up to 10 percent credit.

To simplify the regulations governing FDI and to make India an attractive destination for foreign investors, the government raised FDI limits from 26 to 49 percent in the defense sector, with up to 100 percent FDI possible if there is "modern technology" transfer and government approval. In addition, it has made its FDI defense policy applicable to the manufacturing of small arms and ammunitions covered under the Arms Act of 1959.

The GOI also recently modified its offset policy. Offsets are now only applicable to procurements above INR 2000 crores (approximately $300 million). The GOI has also reinstated services as an avenue for offset discharge. OEMs have been given additional flexibility in modifying their offset plans and partners. In June of 2016, the Ministry of Civil Aviation announced that it would work with the Ministry of Defense to ensure that commercial aero-manufacturing is covered under defense offset requirements.

While the Indian defense sales market offers great potential for defense suppliers, U.S. businesses desiring to make defense related sales to India should be aware that India is still a challenging market and requires patience. Defense procurement timeframes are measured in years. There can be poor transparency in the procurement process and offset regulations can be challenging to navigate. Poor infrastructure and skills gaps pose manufacturing challenges. There can also be substantial payment delays.

In May of 2017, the GOI released its "Strategic Partnership Model" (SPM) to increase India’s defense manufacturing capacity. This SPM strives to create long-term capacity in various defense subsectors of strategic importance. Under the SPM, Indian firms owned and controlled by resident Indian citizens will be selected to be Strategic Partners in the key defense subsectors of fighter aircraft, helicopters, submarines, and armored fighting vehicles/main battle tanks. Under the SPM, the GOI is shortlisting OEMS to work with the selected Strategic Partner to manufacture the platform in India, receive transfer of technology, provide life-cycle support, and develop an eco-system of domestic manufacturers.

Aero India 2019 trade show will likely be held in February 2019. This international show focuses on Aerospace, Defense, Civil Aviation, airport infrastructure and defense engineering and is organized by both the Ministries; Civil Aviation and Defense. The exact dates and venue are still to be determined. The 2017 trade show drew participation from 549 companies and 53 aircrafts.

New RFI and RFP opportunities are listed on the tenders of the India and Central Public Procurement Portal listed below under "Web Resources." Defense ProAc Biz News also lists future projects.

Web Resources

Government of India

Ministry of Defense

Department of Defense Production

Indian Army

Indian Navy

Indian Air Force

Border Security Force (Ministry of Home Affairs)

Central Industrial Security Force (Ministry of Home Affairs)

Tenders India

Central Public Procurement Portal

Defense Procurement Procedures 2016 Capital Procurement Manual

Media and Think Tanks

Institute for Defense Studies and Analyses

Vivekananda International Foundation

Defense ProAc Biz News

Defense Now

For more information about opportunities in this sector contact U.S. Commercial Service Industry Specialist: Nisha Wadhawan at


Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting

India Aerospace and Defense Trade Development and Promotion