Defence self-reliance gains ground as local procurement tops 70%, private sector at 25%

India’s defence sector is making rapid strides towards self-reliance, with more than 70% of defence procurement by value now being sourced domestically and private sector participation in production climbing to 25% from virtually zero in 2001, according to a report released by Equirus Securities.

The report highlighted that key reforms, rising private sector participation, progress on indigenisation, and emerging opportunities in AI, drones, and advanced weapon systems underscore India’s journey towards self-reliance and global competitiveness in the $1.2 trillion defence market.

According to the report, indigenisation has deepened across multiple segments. In shipbuilding, indigenous content has reached 75–80%, while land systems such as tanks are now produced without foreign dependence. In advanced materials, a company-developed ballistic ceramic commands a 95% market share. Additionally, India has achieved 100% domestic cockpit displays for platforms like Sukhoi, LCA, and HTT40.

However, critical gaps remain in high-end avionics, jet engines, and aerospace electronics. Challenges include India’s relatively low R&D spending—just 0.5% of GDP compared to the global average of 2–2.5%—and a prevailing “build to print” approach. Private firms also face risks when investing in R&D without assured orders. “Shifting mindsets towards proactive design and innovation remains critical to overcoming challenges,” the report observed.

On private sector engagement, the report pointed out that participation has surged, contributing almost 25% to defence production, up from zero in 2001. This has been driven by successful indigenous products and enhanced domestic surge capacity during conflicts, opening opportunities in segments once dominated by foreign suppliers. Government reforms, coupled with greater involvement of the armed forces, have further boosted confidence in the sector.

“The evolving mindset of private firms, now willing to invest in long-term R&D, is central to sustaining this growth trajectory,” it added.

What lies ahead

Equirus Securities highlighted that emerging technologies such as AI, drones, long-range precision weapons, hypersonic systems, and unmanned platforms present major opportunities for India’s defence sector. For complex technologies like jet engines, the brokerage suggested strategic acquisitions or global partnerships. The report noted that India’s ammunition industry could tap global demand by producing low-cost, high-volume rounds, with India’s requirement of 80,000 precision rounds significantly higher than the current global output of just 8,000.

Looking ahead, India aims to evolve from being a component supplier to a platform manufacturer—an “Indian Airbus” or “Indian Rheinmetall”—in a global defence market projected to grow from $800 billion to $1.2-1.3 trillion. With exports currently at only $3 billion, Equirus stressed that a long-term vision and focus on global competitiveness will be critical to capturing these opportunities.

According to the report, the defence industry is seeking stronger government support to accelerate private sector capability development. Direct financial backing for platforms—similar to Sweden’s 50% funding support for the Gripen fighter—is seen as crucial, given that current DRDO and DPSU funding often comes with restrictive conditions.

The report highlighted that clear visibility and trust for R&D, along with implementation of policies such as allocating 25% of the R&D budget to private industry, can catalyse lab-to-factory conversion. Expedited procurement processes, from Acceptance of Necessity (AoN) to contract placement, are essential to assure orders and encourage domestic capability growth. Aligning government and industry mindsets towards collaboration and trust will be key for India’s defence self-reliance journey, it added.

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