Strategy and development India

India’s Defense and Aerospace Industry: Growth, Opportunities, and Outlook

Rakhi BAHL
Author

November 6, 2025
Published On

India’s defense and aerospace industry is expanding rapidly, driven by modernization efforts, the “Make in India” initiative, and the elevation of national security priorities. The defense budget, currently around 1.9% of GDP, is expected to gradually rise toward 4%.

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In 2025, the “Aerospace and Defense” subsector reached a value of ₹2,915 crores (≈ €283 million) across 48 transactions — far surpassing the “Defense Machinery” segment (₹665 crores ≈ €64 million, 10 transactions). This signals a clear market shift toward aerospace systems, avionics, and dual-use defense technologies.

India’s defense exports grew from ₹686 crores (≈ €67 million) in 2014 to ₹23,622 crores (≈ €2.29 billion) in 2025, with a year-on-year growth rate of 12%. The government now targets ₹50,000 crores (~€4.85 billion) in defense exports by 2029. Domestic defense production also reached a record ₹1.27 trillion (≈ €12.32 billion) in 2024, up 174% since 2015 — positioning India as an emerging global manufacturing hub.

Global Partnerships and French Collaborations

International partnerships continue to strengthen India’s defense capabilities, with France emerging as one of its most significant strategic allies. Notable collaborations include:

Dassault Aviation – Supplier of Rafale fighter jets for the Indian Air Force (IAF) and Rafale-M for the Indian Navy, supported by a ₹63,000 crore (≈ €611 million) contract signed in 2025.
Safran Group – Collaborating with the DRDO to co-develop a jet engine for the Advanced Medium Combat Aircraft (AMCA), with full technology transfer under discussion.
Safran–Hindustan Aeronautics Limited (HAL) – Production of the Shakti (Ardiden 1H1) engine for indigenous helicopters (Dhruv, LCH, LUH).
Safran–Bharat Electronics Limited (BEL) – Joint venture for the manufacturing of HAMMER precision-guided munitions and MRO operations in India.
Thales Group – Supplier of advanced avionics and mission systems for Rafale and other aircraft.
AXISCADES Technologies – CILAS (France) – Memorandum of Understanding signed to jointly develop advanced counter-UAS (unmanned aircraft systems) technologies for the Indian Armed Forces.
DRDO–NPOM (Russia) – Collaboration on the supersonic cruise missile BrahMos.
HAL partnerships – Collaborations with Boeing and Sukhoi for aircraft manufacturing in India.

The government is also developing Defense Industrial Corridors in Uttar Pradesh and Tamil Nadu to strengthen local ecosystems, attract investment, and promote self-reliance.

Emerging Growth Areas

Defense Drones: India plans to acquire 2,500 drones worth ₹3,000 crores (≈ €291 million); the drone market is expected to exceed USD 40 billion in the next decade.
Space Defense: In October 2024, India approved Phase 3 of its Space-Based Surveillance (SBS) program worth ₹26,968 crores (≈ €2.62 billion), which includes launching 52 satellites to enhance surveillance and communication.
Cybersecurity & AI: Defense cybersecurity spending is increasing, supported by an annual AI innovation fund of ₹100 crores (≈ €9.7 million).
SMEs/MSMEs: Small and medium enterprises are becoming critical Tier 1 and Tier 2 suppliers, driving innovation in materials, precision engineering, and electronics,

With record production, rising exports, and deepening global partnerships — notably with France — India is rapidly emerging as a major power in the defense and aerospace sectors. Strategic agreements, technology transfers, and strong local manufacturing are paving the way toward self-reliance and global competitiveness in defense.