India’s defence sector is set for rapid expansion, with projections reaching Rs 3 lakh crore by FY29, driven by increased government spending, private sector participation, and a focus on indigenous manufacturing and exports.
India’s defence industry is set for another period of rapid expansion, with CareEdge Ratings forecasting the sector will grow from Rs 1.78 lakh crore in FY26 to Rs 3 lakh crore by FY29. That implies a compound annual growth rate of about 19%, driven by higher government spending, stronger private-sector participation, rising exports and a deeper push for indigenous technology, according to the report cited by KNN and ET.
The ratings firm said the industry should also hold profit before interest, lease rentals, depreciation and taxation margins in the 20% to 22% range, a sign that growth is being matched by steady financial performance. It added that policy support remains central to the outlook, including up to 74% foreign direct investment under the automatic route, indigenisation measures, export promotion and increased research spending.
Private companies are playing a larger role. Between FY21 and FY26, private defence production grew at a compound annual rate of about 19.4%, faster than the sector overall, highlighting a shift away from the traditional dominance of state-owned manufacturers. CRISIL Ratings said private defence revenue is expected to rise 15% to 16% this fiscal, supported by an order book of about ₹50,000 crore and by the government’s drive to source 75% of requirements domestically.
The broader procurement pipeline also looks strong. Kotak Institutional Equities told Livemint it expects the capital expenditure cycle in defence to remain robust through FY30, with Acceptance of Necessity approvals rising sharply in recent years. ICICI Direct said India is also preparing a new Defence Acquisition Procedure aimed at simplifying purchases, shortening timelines and increasing indigenous content.
India remains the world’s second-largest arms importer, accounting for 8.2% of global imports in 2021-25, but reliance on foreign suppliers has been easing. The report said imports were down 4% from the 2016-20 period and that Russia’s share had fallen to around 40% as India diversified toward suppliers such as France and Israel.
Exports, meanwhile, have become a more important growth engine. Defence exports reached a record Rs 38,424 crore in FY26, up 62.66% year on year, with public-sector units contributing more than half, according to the report. The number of exporters rose to 145 from 128 a year earlier, and Indian equipment was shipped to more than 80 countries, including Myanmar, the Philippines and Armenia, according to the same assessment and IBEF data.
The government is backing that momentum with a larger budget. The Union Budget for FY27 set aside Rs 7.85 lakh crore for the Ministry of Defence, nearly 2% of GDP, including Rs 2.19 lakh crore for capital spending and Rs 1.85 lakh crore for acquisitions. About 75% of that procurement budget, or Rs 1.39 lakh crore, is reserved for domestic purchases, reinforcing the push for self-reliance as India targets Rs 50,000 crore in defence exports by FY29 and Rs 2.8 lakh crore by 2047.
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