U.S. President Donald Trump recently ordered a halt to the American aid to Ukraine, intensifying pressure on President Volodymyr Zelensky to enter negotiations to end the war with Russia. The decision came after a heated Oval Office meeting where Trump and Vice President J.D. Vance confronted Zelensky, expressing frustration over what they saw as a lack of gratitude for the more than $180 billion in U.S. military and financial assistance sent to Kyiv since Russia’s invasion began in February 2022.
Although, earlier this week, the Trump administration lifted the halt to military aid and intelligence sharing with Ukraine, the importance of American aid was made perfectly clear at this time. The US move to scale back military aid to Ukraine has highlighted NATO’s deep dependence on American defence funding. For years, the US has covered roughly 70% of NATO’s total defence budget, spending an average of 3.4% of its GDP over the past decade. Now, with the Pentagon threatening to cut $50 billion annually, European nations face mounting pressure to strengthen their own military capabilities.
This shift opens avenues for India to collaborate with these nations, offering cost-effective and reliable defence solutions. ANI reported that India’s defence sector is set for significant expansion amid global realignments, according to a report by Nuvama. Defence exports are projected to reach Rs 203 billion in FY25, with the government aiming for Rs 500 billion by FY29. European defence orders could start arriving as early as the first half of FY26, signalling a major breakthrough for the industry. With Europe facing manufacturing limitations, Indian defence firms are well-placed to seize growing export opportunities.
Current Scenario of Indian Defence Sector
India’s defence sector is experiencing a significant transformation, marked by substantial growth in manufacturing and exports. In the first quarter of the fiscal year 2024-25 (April–June 2024), India’s defence exports reached Rs 6,915 crore, marking a whopping 78% increase compared to Rs 3,885 crore during the same period in FY 2023-24. This surge shows India’s growing presence in the global arms market, with its defence products now reaching over 90 countries.
The Ministry of Defence has reported that total defence exports from 2004-05 to 2013-14 stood at Rs 4,312 crore, whereas they have surged to Rs 88,319 crore between 2014-15 and 2023-24. This remarkable growth is attributed to policy reforms aimed at enhancing the ‘Ease of Doing Business’ in the defence sector, providing Indian companies with a competitive edge in the international market.
The government’s ambitious targets further reflect its aspiration to bolster the defence industry. By 2028-29, the aim is to nearly triple India’s annual defence production to Rs 3 lakh crore, with defence exports expected to rise from the current Rs 21,083 crore to Rs 50,000 crore. For the fiscal year 2024-25, the overall annual defence output target is set at Rs 1,75,000 crore, including exports valued at Rs 35,000 crore.
India’s strategic shift from being primarily an arms importer to a significant exporter is evident in its recent international engagements. Notably, India anticipates a $200 million deal to sell short-range Akash missiles to the Philippines, potentially finalizing within the fiscal year beginning in April. This prospective sale, spurred by heightened tensions with China in the South China Sea, represents India’s second major defence contract with the Philippines, following a $375 million agreement for BrahMos missiles in 2022.
India’s defence manufacturing capabilities were prominently showcased at Aero India 2025, held in Bengaluru. The event emphasized boosting defence manufacturing and exports, with Defence Minister Rajnath Singh stating that India’s domestic defence manufacturing value will exceed Rs 1.25 lakh crore and defence exports will surpass Rs 21,000 crore by the end of the fiscal year. The air show attracted over 150 foreign companies and representatives from approximately 30 countries, highlighting India’s growing role in international defence collaboration.
The Role of Europe in Indian Defence Sector
The Pentagon’s recent directive to reduce defense spending by approximately $50 billion annually has significant implications for global defense dynamics. This budgetary shift places increased pressure on European nations to bolster their own military capabilities, potentially leading to heightened defense expenditures and procurement activities.
India’s defence sector is strategically positioned to capitalize on these developments.
Diverse Product Portfolio
India’s defence manufacturing industry produces a wide range of advanced military equipment, catering to both domestic requirements and international demand. This includes:
- Missile Systems: India has developed a strong missile programme, led by the Defence Research and Development Organisation (DRDO). The BrahMos supersonic cruise missile, jointly developed with Russia, has been a major success, securing export orders from countries such as the Philippines. Other missile systems, such as Akash surface-to-air missiles and Astra air-to-air missiles, are also gaining global attention.
- Armoured Vehicles: India’s production of main battle tanks and infantry fighting vehicles has improved significantly. The Arjun MBT and the domestically upgraded T-90 Bhishma tanks form a key part of the Army’s armoured fleet. Meanwhile, the K9 Vajra self-propelled howitzer, manufactured in India by Larsen & Toubro in collaboration with South Korea’s Hanwha, has become a crucial asset for the armed forces.
- Aircraft & UAVs: India is making steady progress in aircraft manufacturing. The Hindustan Aeronautics Limited (HAL)-built Tejas Light Combat Aircraft (LCA) has entered service with the Indian Air Force, and export talks are underway with several nations. The Dornier-228, a twin-turboprop aircraft used for transport and maritime surveillance, has found international buyers. Additionally, India is investing heavily in indigenous drone development, with projects such as the Rustom and Archer UAVs gaining momentum.
- Naval Systems: India’s shipbuilding industry has grown significantly, producing advanced warships, submarines, and maritime patrol vessels. The country has successfully built and commissioned its first indigenous aircraft carrier, INS Vikrant, and is developing next-generation destroyers, frigates, and submarines under ambitious projects such as P-15B (guided missile destroyers) and P-75I (submarines).
Industrial Base
- Public Sector Enterprises: India has 16 defence public sector undertakings (DPSUs), including Hindustan Aeronautics Limited (HAL), Bharat Electronics Limited (BEL), and Mazagon Dock Shipbuilders Limited (MDL). These state-run firms have played a crucial role in the production of aircraft, radar systems, warships, and electronics for the armed forces.
- Private Sector & MSMEs: The involvement of private firms in defence manufacturing has increased significantly, with more than 430 companies now holding industrial licences for defence production. Major players like Larsen & Toubro, Tata Advanced Systems, and Mahindra Defence are actively involved in producing advanced weaponry, armoured vehicles, and aerospace systems. Additionally, India has approximately 16,000 micro, small, and medium enterprises (MSMEs) contributing to the defence supply chain, providing essential components and subsystems.
- Increased Production Value: The combined efforts of DPSUs, private firms, and MSMEs have resulted in a threefold increase in the production value of India’s defence sector since 2014-15. This reflects the country’s transition from an arms importer to an emerging defence exporter.
Government Initiatives
Export Facilitation: The government has simplified defence export procedures, providing financial assistance and diplomatic backing to Indian firms seeking international contracts. Countries such as the Philippines, Armenia, and several African and Southeast Asian nations have become major buyers of Indian defence equipment.
Defence Production & Export Promotion Policy (DPEPP): Introduced to boost indigenous manufacturing and exports, this policy aims to position India among the top global defence exporters. The government has set an ambitious export target of Rs 35,000 crore (£3.3 billion) by 2024-25.
Make in India & Atmanirbhar Bharat (Self-Reliant India) Initiatives: The government has introduced policies to encourage domestic manufacturing and reduce dependence on foreign arms imports. Under these initiatives, India has increased foreign direct investment (FDI) in the defence sector to 74% under the automatic route, attracting global defence manufacturers.
Ban on Imported Defence Items: The Ministry of Defence has issued several negative import lists, banning the import of over 400 military items to encourage domestic production. This move has provided a significant boost to local manufacturers.
As European nations seek to modernize their military capabilities amid reduced U.S. defence spending, India’s expanding defence sector presents a viable alternative for cost-effective and reliable solutions. This convergence of factors positions India to play a big role in the global landscape.
