The year 2025 was the ‘Year of Reforms’ in the Ministry of Defence, aimed at accelerating progress in defence indigenisation with a goal - to reach Rs 1.75 lakh crore revenue in local defence production in FY26 and a long-term target of achieving Rs 3 lakh crore in defence production and exports of Rs 50,000 crore by 2029.

India is on track to reach the first goal, as defence production reached an all-time high of Rs 1.54 lakh crore in FY25 with a growth of 18% over the previous fiscal, and from a revenue of Rs 46,429 crore a decade ago. Indigenous defence production was a record Rs 1,27,434 crore in FY24. Experts say production in the current fiscal year will exceed the target for FY26. Defence exports have also reached a record Rs 23,622 crore in FY25, compared to less than Rs 1,000 crore in 2014.

Now the share of private companies in defence production has reached 23%, which was less than 10-15% a decade ago. Ministry of Defence (MoD) data says India's defence sector ecosystem now includes 16,000 MSMEs, and 788 industrial licenses have been issued to 462 companies.

The Union Budget 2024-25 allotted Rs 1.72 lakh crore for capital acquisitions, a 20.33% increase over the actual expenditure of FY23 and 9.40% compared to the Revised Estimates of FY24. India’s Defence Acquisition Council (DAC) has approved capital acquisition proposals worth Rs 79000 crore in the winter session, taking the FY26 year to date approvals to Rs 3.3 lakh crore, nearly double the capital outlay on defence.

Private defence companies are set to clock 16-18% revenue growth this year, led by continuing strong domestic demand, following a 20% compound annual growth rate (CAGR) logged between fiscal 2022 and 2025, says Crisil Ratings, analysing the performance of over 25 private defence companies that together contribute to nearly half of the industry revenues.

''Over the past three fiscals, defence companies have seen equity infusions of Rs 3,600 crore on a net worth base of Rs.4760 crores at the end of fiscal 2022, largely through public offerings and private equity. While a third of such monies went into working capital funding, almost half were utilised for capital expenditure, R&D, and innovation, thus enhancing capabilities among private sector defence companies, enabling them to secure larger orders,” says Jayashree Nandakumar, Director, Crisil Ratings.

Crisil estimates that overall order books for these private companies are estimated to reach Rs 55,000 crore at the end of this fiscal from Rs 40,000 crore at the end of fiscal 2024. The segments aiding the order book expansion include electronic warfare systems, C4 (command, control, communications, computers and intelligence) systems, and aerospace equipment and components, among others.

Major DAC Acceptance of Necessity (AoN) approvals in 2025

March 2025 - Rs 54,000 crore

For procuring the 1,350 HP engines for T-90 tanks and indigenously developed Varunastra torpedoes and Airborne Early Warning & Control (AEW&C) systems.

July 2025 - Rs 1.05 lakh crore

10 capital acquisition proposals valued at approximately ₹1.05 lakh crore - Armoured Recovery Vehicles, Electronic Warfare System, Integrated Common Inventory Management System for the Tri-Services, Surface-to-Air Missiles, Moored Mines, Mine Counter Measure Vessels, Super Rapid Gun Mount, and Submersible Autonomous Vessels.

August 2025 - ₹67,000 crore

Clearance to procure Thermal Imager-based Night Sights for BMPs for the Army, Compact Autonomous Surface Craft, BrahMos Fire Control Systems, and BARAK-1 upgrades for the Navy, and Mountain Radars along with SAKSHAM/SPYDER upgrades for the Air Force. The DAC also cleared indigenous Medium Altitude Long Endurance (MALE) RPAs for all three Services, and maintenance support for C-17, C-130J, and S-400 systems.

October 2025 - ₹79,000 crore

Clearance to Advanced Light Weight Torpedoes (ALWT) developed by DRDO's Naval Science & Technological Laboratory for the Navy. The other approvals include the Nag Missile System (Tracked) Mk-II (NAMIS), Ground Based Mobile ELINT System (GBMES), and High Mobility Vehicles (HMVs) for the Army; Landing Platform Docks, and 30mm Naval Surface Guns for the Navy; and the Collaborative Long Range Target Saturation/Destruction System for the Air Force.

Budget FY26

Outlook 2026: Defence production set to exceed target of Rs 1.75 lakh crore this fiscal