Blitz Bureau
NEW DELHI: DEFENCE sector in the country is witnessing an unprecedented surge, powered by a strategic shift to empower private industry and a raft of policy reforms under the ‘Aatmanirbhar Bharat’ initiative.
In the fiscal year 2024-25, indigenous defence production soared to a record Rs 1,50,590 crore, an 18 per cent jump from the previous year, while defence exports hit an all-time high of Rs 23,622 crore.
At the heart of this transformation is a landmark new Transfer of Technology (ToT) policy unveiled by the Defence Research and Development Organisation (DRDO) in February 2025. The policy is designed to dismantle historical barriers for startups and Micro, Small, and Medium Enterprises (MSMEs).
This policy pivot, combined with robust institutional funding and massive procurement orders, is creating a vibrant ecosystem that is rapidly reducing import dependency and positioning India as a significant global player in defence manufacturing.
Private sector role
The data paints a compelling picture of growth. The Rs 1.51 lakh-crore production figure for 2024-25 represents a staggering 90 per cent increase since 2019-20. The private sector’s role is expanding rapidly, now accounting for 23 per cent of total production, up from 21 pc the previous year. More significantly, private sector output grew by 28 pc, outpacing the public sector’s 16 pc growth, indicating that policy reforms are successfully unlocking private enterprise.
On the global front, India’s defence exports have seen a more than 34-fold increase over the past decade, from just Rs 686 crore in FY 2013-14 to Rs 23,622 crore in FY 2024-25. India now exports defence equipment to over 100 countries, with the private sector contributing about 60 per cent of this total.
A key catalyst for this momentum is the DRDO’s revised ToT policy. Moving away from its traditional preference for public sector undertakings, the new policy actively courts private innovators. A groundbreaking provision allows for the transfer of DRDOdeveloped ‘feeder technologies’ to MSMEs and startups at 50 pc of the standard ToT fee, substantially lowering the financial barrier to entry.
A quantum leap
The impact is evident in the numbers. In the calendar year 2024 alone, DRDO signed over 2,000 licensing agreements for technology transfer and issued more than 200 production licenses. This is a quantum leap from just a few years ago. For comparison, only 15 such licences were handed over during the entirety of the DefExpo 2020 event.
This policy push is supported by a sophisticated, multi-stage institutional framework. The Innovations for Defence Excellence (iDEX) initiative acts as a scouting mechanism, engaging over 619 startups and MSMEs and signing 430 development contracts as of early 2025.Promising ideas are then nurtured by the Technology Development Fund (TDF), which provides grants of up to Rs 50 crore to mature prototypes.
As of August 2025, the TDF scheme had sanctioned 81 projects worth nearly Rs 344 crore, successfully developing 30 technologies. Crucially, this innovation pipeline is backed by clear market demand. The Defence Acquisition Council (DAC), the apex procurement body, has granted Acceptance of Necessity (AoN) for indigenous systems worth well over Rs 2 lakh crore in 2024 and 2025, sending a powerful signal to the industry that there is a confirmed market for homegrown products.
The real-world impact of this ecosystem is visible in the success of a new class of defence-tech startups. Chennai-based Big Bang Boom Solutions secured a landmark order worth over Rs 200 crore from the Indian Army and Air Force in 2024 for its antidrone technology. Bengaluru’s NewSpace Research & Technologies has become a leader in AI-driven swarm drones, while Mumbai’s Sagar Defence Engineering has partnered directly with DRDO to develop India’s first underwater-launched UAVs.
Significant challenges
However, significant challenges persist. Industry insiders point to the “complex” and “arduous” Defence Acquisition Procedure (DAP) as a major hurdle for smaller firms. A critical policy anomaly also exists: the Ministry of Defence is exempt from the Government-wide mandate requiring ministries to procure at least 20 pc of their needs from MSMEs, depriving these firms of an assured market.
The Government has acknowledged these bottlenecks, designating 2025 as the ‘Year of Reforms’ and constituting a high-level committee to conduct a comprehensive review of the DAP 2020.18 The success of this review will be critical in determining whether India can achieve its ambitious targets of Rs 3 lakh crore in defence production and Rs 50,000 crore in exports by 2029.21.
While the policy push for innovation has been a resounding success, resolving the systemic pull challenges in procurement will be a true test of India’s ambition to build a self-reliant and globally competitive defence industrial base.
