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.
Indicator | Latest evidence | Implication for industry |
Global major-arms transfers | 2021–25 volume +9.2% vs 2016–20; Europe +210% | Sustained rearmament is translating into multi-year production demand. |
US share of global arms exports | 42% in 2021–25 | Scale, standardisation and dependable delivery remain decisive competitive advantages. |
India’s position as importer | 2nd largest recipient; 8.2% of global imports in 2021–25 | Domestic capacity still has a large import-substitution opportunity. |
Pakistan’s imports | +66% between 2016–20 and 2021–25; 80% supplied by China | India faces a regional environment in which neighbouring capabilities are also being replenished and modernised. |
Japan’s imports | +76% between 2016–20 and 2021–25 | Even advanced industrial economies are combining imports with accelerated indigenous missile production. |
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.
Country | Observed approach | Relevant lesson for India |
United States | Large domestic demand + deep private supply chain + export scale | Use domestic orders to create repeatable production and supplier resilience. |
Israel | Focused R&D, system integration and export-oriented specialist firms | Build excellence in selected high-value technologies and lifecycle support. |
Japan | Fast-track imports while expanding indigenous stand-off missile production | Avoid an either/or choice between immediate readiness and long-term self-reliance. |
South Korea / China | Increasing domestic design and production reduced import dependence | Measure indigenisation by control of critical technologies and production capacity, not assembly alone. |
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.
Opportunity layer | Examples of industrial participation | Commercial logic |
Materials & structures | Special alloys, composites, forgings, castings, thermal materials | Reusable capability across missiles, aircraft, launch vehicles and space systems. |
Precision manufacturing | High-tolerance machining, tooling, metrology, specialised joining | High barriers to qualification create durable supplier relationships. |
Electronics & controls | Rugged electronics, power systems, actuation, embedded computing | High value-add and recurring obsolescence/upgrade demand. |
Test & qualification | Environmental, EMI/EMC, vibration, metrology, NDT, simulation | Every production batch requires assurance; capacity can serve many programmes. |
Lifecycle support | Inspection, spares, diagnostics, refurbishment, software support | Creates long-duration revenue beyond initial procurement. |
Export supply chains | Qualified components/subsystems for approved overseas programmes | Allows firms to internationalise without needing to export complete weapon systems. |
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
Metric | Figure | Period |
India defence production | ₹1.78 lakh crore | FY2025–26, Ministry of Defence |
Growth in defence production | 15.6% year-on-year; +110% vs FY2020–21 | FY2025–26 |
Private-sector share of production | 24% (about ₹42,000 crore) | FY2025–26 |
India defence exports | ₹38,424 crore | FY2025–26 |
Export growth | 62.66% year-on-year | FY2025–26 |
Private-sector share of exports | 45.16% (₹17,353 crore) | FY2025–26 |
Export destinations | 80+ countries | FY2025–26 |
India share of global major-arms imports | 8.2%; world rank #2 | 2021–25, SIPRI |
MoD budget | ₹7.85 lakh crore | FY2026–27 |
Capital head | ₹2.19 lakh crore | FY2026–27 |
Domestic-industry procurement earmark | ₹1.39 lakh crore | FY2026–27 |
DRDO allocation | ₹29,100.25 crore | FY2026–27 |
BrahMos Philippines export contract | $375 million | Signed January 2022 |
Global major-arms transfer growth | +9.2% | 2021–25 vs 2016–20 |
European arms-import growth | +210% | 2021–25 vs 2016–20 |
Sources and notes
- Stockholm International Peace Research Institute (SIPRI), “Trends in International
Arms Transfers, 2025,” March 2026; SIPRI Yearbook 2026, International Arms
Transfers chapter. - NATO, “Increasing defence industrial production,” updated 8 July 2026.
- Japan Ministry of Defense, Defence of Japan 2025, sections on stand-off defence capabilities and ammunition; FY2025 budget key points.
- 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.
- Press Information Bureau, Ministry of Defence, “Defence exports skyrocket to record Rs 38,424 crore in Financial Year 2025-26,” 2 April 2026.
- 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.
- Press Information Bureau, Ministry of Defence, “The Defence Decade,” 17 June 2026; related 2026 defence-manufacturing factsheets.
- 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. - Israel Ministry of Defense, “Historic Milestone: Arrow 3 System Handover Marks
New Chapter in Israeli-German Defense Partnership,” 3 December 2025. - [Japan Ministry of Defense, FY2026 Budget – Major Projects; March 2026 announcement on first deployment of domestically produced stand-off missiles.
- [Press Information Bureau, Ministry of Defence, “Raksha Mantri approves Transfer of Technology of DRDO-developed missile systems to Indian defence industry,” 25
August 2026. - [DRDO public material on industry participation, Development-cum-Production
Partners, technology transfers and access to test facilities, 2024–25.
.png)