By: CA  Anil K. Jain   

Chartered Accountant | Economist | Policy Researcher | Author     

President – Ahimsa Foundation India  Email: CAINDIA@HOTMAIL.COM

Why sovereign capacity, scalable production, resilient supply
chains and responsible exports matter more than ever

Old
Article – Expanded and updated edition — data current to September 2026

Recent conflicts and military modernisation
programmes show that precision-guided weapons, air- and missile-defence
interceptors, stand-off weapons and their supporting sensors, electronics,
propulsion, materials, test infrastructure and maintenance capacity are
strategic consumables that must be available in depth. For India, the
opportunity is therefore larger than selling complete missiles: it is to build
a durable national industrial ecosystem capable of meeting sustained domestic
demand, replenishing stocks rapidly, reducing import exposure and participating
responsibly in global supply chains.

1. The global context has changed: demand is deeper,
faster and more persistent

I had in my earlier  article  identified
rising geopolitical demand and the possibility of moving India from a
predominantly importing position toward a stronger manufacturing and exporting
role. It also highlighted indigenous capability, private-sector participation,
technology, skills and long-term procurement as central themes. Those
propositions remain valid, but the scale of the opportunity is now clearer. The
global volume of major arms transfers in 2021–25 was 9.2% higher than in
2016–20, the largest five-year increase since 2011–15. European arms imports
rose by 210% between the two periods. The United States accounted for 42% of
global major-arms exports in 2021–25, while France held 9.8% and Russia
6.8%.

The lesson is not simply that defence expenditure
is rising. Modern conflicts have exposed the industrial importance of
production rate, replenishment time, component availability, storage,
maintenance, software support and the ability to surge output. NATO now
explicitly describes robust and flexible defence-industrial capacity as
essential in peace, crisis and conflict and is pressing allies to expand
production. Japan, similarly, is accelerating mass production and
acquisition of several categories of stand-off missiles while expanding domestic
manufacturing capacity.

 2. Why the need is especially important for India

2.1 Strategic geography and two-front planning require
depth, not token inventories

India must plan for a demanding security
environment across continental and maritime theatres. SIPRI reports that India
was the world’s second-largest recipient of major arms in 2021–25, accounting
for 8.2% of global imports. Russia’s share of Indian imports fell from 70% in 2011–15
to 40% in 2021–25, illustrating diversification but also continuing external
dependence.  For a country of India’s size, the central industrial question
is therefore not whether it can design individual systems; it is whether it can
manufacture, replenish, upgrade and support sufficient quantities over long
periods without critical external bottlenecks.

2.2 Import substitution is a strategic and economic
opportunity

India’s defence production reached a record
₹1.78 lakh crore in FY2025–26, up 15.6% from the previous year and 110% from
FY2020–21. Public-sector entities accounted for about 76% and the private
sector 24%. Defence exports reached ₹38,424 crore in FY2025–26, 62.66% above
FY2024–25; the private sector contributed ₹17,353 crore, or 45.16% of
exports. These figures show that the industrial base is expanding, but the
import data show that substantial headroom remains.

2.3 The budget now provides a larger domestic demand
anchor

The Union Budget for FY2026–27 allocated
₹7.85 lakh crore to the Ministry of Defence, including ₹2.19 lakh crore under
the capital head. Of this, ₹1.39 lakh crore was earmarked for procurement from
domestic defence industries, including private players. DRDO’s allocation was
₹29,100.25 crore.[6] A predictable domestic order book of this scale can
support investments in tooling, quality systems, test facilities, specialised
materials, electronics, skilled manpower and supplier development—provided
procurement is converted into sufficiently long production runs and timely
contracts.

3. Missiles should be viewed as an industrial ecosystem,
not merely as  weapons

The largest opportunity for Indian industry
lies across the value chain. A missile programme draws on advanced materials,
precision machining, composites, electronics, sensors, seekers, navigation and
control hardware, power systems, specialised software, propulsion-related
industrial capabilities, launch and support equipment, environmental
qualification, testing, storage, inspection, maintenance and lifecycle
services. The policy objective should be to deepen Indian ownership of these
industrial competencies rather than measuring self-reliance only by final
assembly.

·        
Prime-system integrators:
public and private firms able to integrate complete systems under government
authorisation and stringent quality assurance.

·        
Tier-1 and Tier-2 suppliers:
structures, electronics, actuation, ruggedised computing, RF components, power
electronics, specialised materials and precision engineering.

·        
MSMEs: fixtures, tooling,
machining, cable assemblies, enclosures, testing services, coatings, castings,
forgings and qualified sub-components.

·        
Technology firms and startups:
simulation, embedded software, AI-enabled diagnostics, cyber security, digital
engineering, condition monitoring and manufacturing automation.

·        
Infrastructure providers:
accredited laboratories, environmental and electromagnetic testing, metrology,
non-destructive evaluation, secure logistics and lifecycle-support facilities.

This ecosystem approach also spreads
economic benefits beyond a few prime contractors. A 2025–26 government review
described an Indian defence ecosystem of 16 DPSUs, around 500 licensed defence
companies and nearly 17,000 MSMEs, with 834 defence industrial licences as of
March 2026.[7] Missile programmes can act as anchor programmes that pull these
firms toward higher tolerances, better certification and more sophisticated
production disciplines.

4. India already has proof that missile programmes can
create industrial scale

The BrahMos programme is an important
commercial and industrial reference point. In January 2022, BrahMos Aerospace
signed a $375 million contract with the Philippines for a shore-based anti-ship
missile system, demonstrating that an Indian-based missile programme can win a
major overseas order. In March 2024, India also signed a ₹19,518.65 crore
domestic procurement contract for BrahMos missiles for the Navy; the government
estimated about nine lakh man-days of employment at the joint-venture level and
around 135 lakh man-days in ancillary industries, many of them MSMEs.

The significance of such programmes is
larger than the value of the prime contract. They create recurring demand for
qualified vendors, inspection and test services, spares, training, maintenance
and upgrades. A successful export can also establish reference credibility for
other Indian defence products, provided delivery schedules, after-sales support
and export-control obligations are consistently met.

5. International examples India can learn from

5.1 United States: scale, long production runs and
supplier depth

The United States’ 42% share of global
major-arms exports in 2021–25 illustrates the advantage of a large home market
combined with standardised allied demand and deep private-sector supply chains.[1]
The transferable lesson for India is not to copy the US structure, but to
recognise that export competitiveness follows production maturity: stable
domestic orders, repeat manufacturing, high reliability, supplier redundancy
and long-term support make international customers more confident.

5.2 Israel: focused technology plus exportable air- and
missile-defence systems

Israel increased its share of global
major-arms exports from 3.1% in 2016–20 to 4.4% in 2021–25.[1] In December
2025, Israel handed over the first operational Arrow 3 system to Germany under
what the Israeli Ministry of Defense describes as the largest defence export
deal in the country’s history. The programme combines government R&D
organisations, the US Missile Defense Agency, Israel Aerospace Industries and
major subcontractors.[9] The industrial lesson is the value of sustained
government-industry R&D partnerships and specialised supplier networks.

5.3 Japan: accelerated indigenous production alongside
selective imports

Japan’s current approach is particularly
relevant to India. Its defence ministry has accelerated domestic stand-off
missile production, began deployment of domestically produced stand-off
missiles in March 2026 and budgeted approximately ¥973 billion for stand-off
defence capabilities in FY2026. The budget includes acquisition of upgraded
Type-12 missiles, submarine-launched missiles, hyper-velocity glide projectiles
and hypersonic missiles, while retaining selective foreign acquisitions.[3][10]
This demonstrates a pragmatic model: import where speed demands it, but invest
simultaneously in domestic production capacity and future designs.

5.4 South Korea and China: reducing import dependence
through domestic design capability

SIPRI notes that South Korea’s major-arms
imports fell 54% between 2016–20 and 2021–25 partly because of its growing
ability to design and produce major arms domestically. China’s imports fell 72%
over the same comparison as its domestic production expanded.[1] The broader
lesson for India is that a sustained design-to-production ecosystem can
progressively reduce reliance on foreign suppliers, but only when domestic
programmes reach scale and are delivered on time.

 6. A major policy opening for Indian private industry

A particularly important development
occurred in August 2026: the Ministry of Defence announced approval for
transfer of DRDO-developed technologies of all conventional missile systems to
qualified Indian defence industry for domestic production, subject to
applicable qualifications, certifications and regulatory requirements.[11] This
can materially widen the industrial base if implementation is transparent,
competitive and accompanied by adequate production orders.

The direction is consistent with DRDO’s
broader industry model. DRDO has reported more than 1,800 technology transfers
to Indian industry, over 120 systems with identified Development-cum-Production
Partners or Production Agencies, and more than 18,000 tests conducted for
private industry/DPSUs over a three-year period; it has also stated that
segments including missiles have been opened to private industry for
development.[12]

7. The business opportunity is broader than complete
missile exports

For most private companies—especially
MSMEs—the realistic entry route is not to become a complete missile prime contractor
on day one. The larger addressable opportunity lies in qualified subsystems,
components, materials, production equipment, software, test services and
lifecycle support. This is commercially important because these capabilities
can serve multiple missile families and, in many cases, adjacent aerospace,
space and electronics markets.

 8. What India must do differently to convert opportunity
into capacity

8.1 Move from annual procurement to credible multi-year
production visibility

Missile manufacturing requires
capital-intensive facilities, long qualification cycles and specialised
suppliers. Industry will invest more confidently when it can see a credible
multi-year demand profile. Long-term procurement plans should therefore
identify broad capability families and production horizons while preserving
necessary security and procurement safeguards. Framework contracts and option
quantities can help create surge capacity without requiring the government to
purchase every unit immediately.

8.2 Pay for production capacity, not only delivered units

A recurring lesson from current global
rearmament is that idle capacity disappears if it is not economically
sustainable. India should consider contracting mechanisms that reward
maintained tooling, trained workforces, qualified alternate suppliers and surge
readiness where strategically justified. The aim is resilience: the ability to
increase output when demand rises suddenly.

8.3 Develop second sources for critical inputs

A system can be described as indigenous yet
remain vulnerable if a small number of imported microelectronics, sensors,
materials, machine tools or specialised chemicals constrain output.
Supply-chain mapping should identify single points of failure and progressively
create Indian or diversified alternatives. Strategic stockpiles of selected
long-lead inputs may be justified where domestic substitution is not
immediately economical.

8.4 Expand shared test infrastructure

Qualification facilities are expensive and
can become bottlenecks. Government laboratories and ranges should continue to
be opened to qualified industry on transparent schedules and charges, while
private accredited test capacity should be encouraged. Shared infrastructure
lowers entry barriers for MSMEs and startups and avoids duplicating capital
equipment.

8.5 Make quality and traceability export-grade from the
start

International customers buy reliability and
support, not merely specifications. Indian programmes should require digital
configuration control, component traceability, statistical process control,
secure software practices, counterfeit-part prevention, lifecycle documentation
and robust after-sales arrangements. These disciplines also reduce failures and
rework in domestic service.

8.6 Build human capital as deliberately as hardware

The most valuable constraint may be
experienced people: systems engineers, RF specialists, materials scientists,
quality engineers, embedded-software developers, test engineers and skilled
technicians. Defence corridors, IITs, NITs, universities, ITIs and industry
should build specialised programmes, apprenticeships and faculty-industry
laboratories around these competencies.

8.7 Use exports to improve scale—but keep them responsible
and sustainable

Exports can lower unit costs, lengthen
production runs and improve supplier economics. India’s defence exports already
reach more than 80 countries, and 145 exporters participated in FY2025–26.[5]
Export growth should, however, remain consistent with Indian law, end-use
controls, international obligations, foreign-policy considerations and the
readiness requirements of the Indian Armed Forces. Export success also requires
financing, training, spares, maintenance and dependable delivery—not merely an
export licence.

9. Defence corridors can become missile-industry clusters

India’s defence industrial corridors in
Uttar Pradesh and Tamil Nadu provide a natural platform for clustering
missile-related suppliers with common testing, tooling, logistics, skilling and
research infrastructure. Cluster economics matter: when primes, MSMEs,
laboratories, universities and logistics providers operate near one another,
development cycles can shorten and specialised suppliers can serve several
programmes. The earlier BrahMos manufacturing investment in Uttar Pradesh,
cited in the original article, illustrates how a major programme can anchor
regional employment and supplier development.

The next step should be to treat corridors
as capability clusters rather than real-estate projects: map which technologies
are missing, attract those suppliers, create common qualification facilities
and link procurement opportunities to local vendor-development programmes
without compromising competition or quality.

10. Risks and constraints that should not be understated

·        
Long development and
qualification cycles can delay returns on capital.

·        
Export markets are politically
sensitive and subject to licensing, sanctions, end-use conditions and changing
diplomatic relationships.

·        
Demand can be lumpy; firms
should avoid business models dependent on a single programme or customer.

·        
Critical imported components
can create hidden vulnerabilities even when final assembly is domestic.

·        
Rapid technology
change—especially in countermeasures, electronics, autonomy and sensing—can
shorten product cycles.

·        
Cyber security,
intellectual-property protection and insider-risk controls are essential
throughout the supply chain.

·        
Safety, storage, transport and
environmental compliance require specialised governance and cannot be treated
as ordinary manufacturing overheads.

For these reasons, the most sustainable
policy is not indiscriminate capacity creation. It is disciplined capacity
creation tied to credible demand, qualified technology, robust safety and
quality systems, diversified suppliers and export opportunities that are
legally and strategically supportable.

11. A practical national action agenda

1. Publish a 10-year industrial demand signal: Provide industry with non-sensitive visibility on broad missile,
interceptor and precision-weapon production families, replenishment
requirements and expected localisation priorities.

2. Convert technology transfer into production orders:
Use the August 2026 opening of conventional DRDO
missile technologies to create transparent qualification pathways and
competitive production capacity.

3. Create a Critical Missile Supply-Chain Mission: Map imported dependencies and prioritise domestic alternatives in
electronics, materials, precision components, test equipment and other
long-lead items.

4. Finance capacity expansion: Use appropriate long-tenor financing, milestone-linked support and
shared infrastructure for qualified suppliers rather than relying only on
short-term working capital.

5. Develop dual/second sources: Avoid single-vendor fragility for strategically important components
wherever technically and economically feasible.

6. Build common test and certification centres: Expand access to government facilities and establish accredited
shared centres in defence corridors.

7. Create a supplier-upgradation programme for MSMEs: Help firms meet traceability, cyber-security, quality, documentation
and export-compliance requirements.

8. Link skilling to confirmed industrial demand: Create apprenticeships and specialised curricula jointly designed by
DRDO, the Services, DPSUs, private primes and educational institutions.

9. Institutionalise export support: Coordinate export authorisations, government-to-government
engagement, financing, training and lifecycle support while maintaining end-use
and legal safeguards.

10. Track outcomes, not announcements: Measure domestic value addition, production rate, delivery time,
number of qualified second sources, export repeat orders, field reliability and
lifecycle-support performance.

12. The economic case for India

The economic case rests on four mutually
reinforcing effects. First, import substitution retains more value within India
and reduces exposure to foreign supply disruptions. Second, long production
runs support skilled employment and capital investment across a wide supplier
base. Third, defence technologies can spill into civil aerospace, space,
electronics, advanced materials, robotics and high-precision manufacturing.
Fourth, exports can improve economies of scale and bring foreign-exchange
earnings.

India’s current trajectory shows that these
effects are no longer theoretical. Defence production of ₹1.78 lakh crore and
exports of ₹38,424 crore in FY2025–26 represent a much larger industrial base
than a decade ago.[4][5] The government has stated targets of ₹3 lakh crore in
annual defence production and ₹50,000 crore in exports by 2029.[7] Missile and
precision-weapon supply chains can make a significant contribution to these
goals because they combine high technology, recurring replenishment demand and
a wide network of specialised suppliers.

13. Conclusion: India should build for sustained
readiness, not episodic procurement

India has already demonstrated competence
in missile design, integration and production through programmes such as Agni,
Akash and BrahMos, and the original article was right to identify this domain
as an important industrial opportunity. The stronger conclusion in 2026 is that
missile manufacturing should be treated as strategic national infrastructure.
The decisive capability is not a prototype or even a single production line; it
is the ability to produce dependable systems and subsystems at scale, replenish
inventories quickly, absorb technology changes, sustain products for decades
and support approved export customers.

For India, the need is especially
compelling because it combines national-security requirements with a large
domestic procurement base, persistent import dependence in parts of the defence
sector, a rapidly expanding private industry, a large engineering workforce and
growing export credibility. The policy priority should therefore be to turn
India’s design successes into production depth: more qualified suppliers, more
second sources, more test capacity, stronger skills, greater domestic control
of critical technologies and longer, predictable production runs.

If pursued with disciplined procurement,
rigorous quality, responsible export controls and close collaboration among the
Armed Forces, DRDO, DPSUs, private primes, MSMEs, startups and academia, the
missile ecosystem can become a powerful driver of strategic autonomy,
industrial sophistication, high-value employment and export
competitiveness—while first and foremost ensuring that India can meet its own
defence requirements reliably and at scale.

Key statistics at a glance

Sources and notes

1. Stockholm International Peace Research Institute (SIPRI), “Trends in International
   Arms Transfers, 2025,” March 2026; SIPRI Yearbook 2026, International Arms
   Transfers chapter.
2. NATO, “Increasing defence industrial production,” updated 8 July 2026.
3. Japan Ministry of Defense, Defence of Japan 2025, sections on stand-off defence
   capabilities and ammunition; FY2025 budget key points.
4. Press Information Bureau, Ministry of Defence, “Defence production soars to a
   record Rs 1.78 lakh crore in Financial Year 2025-26,” 17 June 2026.
5. Press Information Bureau, Ministry of Defence, “Defence exports skyrocket to
   record Rs 38,424 crore in Financial Year 2025-26,” 2 April 2026.
6. Press Information Bureau, Ministry of Defence, “Ministry of Defence allocated
   an all-time high of Rs 7.85 lakh crore in Union Budget 2026-27,” 1 February
   2026; PIB Budget backgrounder, 3 February 2026.
7. Press Information Bureau, Ministry of Defence, “The Defence Decade,” 17 June
   2026; related 2026 defence-manufacturing factsheets.
8. Press Information Bureau defence background material: BrahMos Aerospace–Philippines
   $375 million contract (January 2022) and March 2024 Indian Navy BrahMos
   procurement valued at ₹19,518.65 crore.
9. Israel Ministry of Defense, “Historic Milestone: Arrow 3 System Handover Marks
   New Chapter in Israeli-German Defense Partnership,” 3 December 2025.
10. [Japan Ministry of Defense, FY2026 Budget – Major Projects; March 2026
    announcement on first deployment of domestically produced stand-off missiles.
11. [Press Information Bureau, Ministry of Defence, “Raksha Mantri approves Transfer
    of Technology of DRDO-developed missile systems to Indian defence industry,” 25
    August 2026.
12. [DRDO public material on industry participation, Development-cum-Production
    Partners, technology transfers and access to test facilities, 2024–25.