Defence production and Make in India in defence

In short

Defence production is the domestic design, development and manufacture of weapons, platforms, ammunition and sub-systems, and the policy framework that decides what India builds versus what it buys. It matters because India has been the world's largest arms importer in recent years (SIPRI put India at about 8% of global imports for 2020-24), and import dependence is both a strategic vulnerability and a drain on foreign exchange. Since Make in India was launched on 25 September 2014, the instruments have been the Defence Acquisition Procedure (DAP) 2020, the Defence Production and Export Promotion Policy (DPEPP) 2020, positive indigenisation lists, corporatisation of the Ordnance Factory Board and an opened-up private sector. The topic is examined in Defence and Strategic Studies papers on India's security and economy, in UPSC/CDS/CAPF and state PSC general studies, and it is the standard interview ground for jobs in DPSUs, private defence firms, think tanks and defence journalism.

Explained

Why indigenisation is a strategic question, not only an industrial one

• Sovereign freedom of action: imported platforms carry end-use monitoring, spares dependence and the risk of denial during a conflict — the 1965 and 1971 arms embargoes, and post-1998 Pokhran-II sanctions, are the standard Indian illustrations.
• Single-supplier risk: Russia has long supplied the bulk of Indian inventory; SIPRI data for 2020-24 shows its share of Indian imports falling to roughly a third as France, the United States and Israel gained. Diversification reduces, but does not remove, dependence.
• Economic logic: capital acquisition is one of the largest discretionary items in the Union budget (capital outlay of about ₹1.80 lakh crore in FY2025-26 within a total defence allocation of about ₹6.81 lakh crore); money spent at home creates jobs, taxes and an export base.
• Technology spin-off: aerospace, materials, electronics and propulsion capabilities built for defence feed civil industry (the dual-use argument).
• Limits of autarky: no country is fully self-reliant. The realistic goal is self-reliance in design authority and in sustainment (spares, ammunition, repair), not 100% domestic content.

The policy architecture: DAP 2020 and its categories

• DAP 2020 (effective 1 October 2020, replacing DPP 2016) governs capital acquisition; revenue/stores procurement follows the Defence Procurement Manual. A comprehensive revision of DAP was taken up in 2025 as part of MoD's declared "Year of Reforms"; for exam purposes quote DAP 2020 and say which edition you are citing.
• Decision chain: Services' capability requirement → Long Term Integrated Perspective Plan and Annual Acquisition Plan → Acceptance of Necessity (AoN) by the Defence Acquisition Council (chaired by the Defence Minister) → RFP → technical evaluation → field trials → staff evaluation → Contract Negotiation Committee → CCS/competent financial authority approval → contract.
• Order of priority of categories (highest first), each with a minimum indigenous content (IC):
  1. Buy (Indian-IDDM) — Indigenously Designed, Developed and Manufactured; minimum 50% IC on cost basis. Highest preference.
  2. Buy (Indian) — Indian vendor, minimum 50% IC if the design is Indian, 60% if it is not.
  3. Buy and Make (Indian) — initial import by an Indian vendor with transfer of technology, then licensed production; minimum 50% IC of the "make" portion.
  4. Buy (Global — Manufacture in India) — a foreign OEM manufactures in India through a subsidiary or Indian partner; minimum 50% IC.
  5. Buy (Global) — outright import; an Indian vendor bidding needs 30% IC. Lowest preference.
• New DAP 2020 features: a Leasing category (Chapter VI) for assets needed without ownership, IC raised by about 10 percentage points across categories, a product support/life-cycle support chapter, and an Indian-currency option for foreign vendors.
• Strategic Partnership Model (Chapter VII): one Indian private "strategic partner" per segment tied to a foreign OEM for submarines, fighter aircraft, helicopters and armoured fighting vehicles, to build long-term platform capability.

"Make" procedures, design-led development and innovation funding

• Make-I (government funded): prototype development with up to 70% of development cost funded by MoD, capped at ₹250 crore per project; for items of high complexity.
• Make-II (industry funded): no government funding, but assured orders if the prototype meets requirements; simplified, short timelines, aimed at import substitution.
• Make-III: not design and development — manufacture in India with ToT of items earlier imported, to substitute imports for maintenance and sustainment.
• iDEX (Innovations for Defence Excellence) with the Defence Innovation Organisation funds startups and MSMEs through Defence India Startup Challenges; SPRINT targets naval innovation and ADITI supports deep-tech with grants of up to about ₹25 crore. iDEX grants (iDEX Prime) are far smaller than Make-I funding but far faster.
• Technology Development Fund (TDF), run by DRDO, funds industry-led development; the per-project ceiling was raised to ₹50 crore.
• Development-cum-Production Partner (DcPP) and DRDO's policy of transferring technology to multiple production agencies, with zero-cost ToT for several systems, move DRDO from "develop then hand over" to co-development.
• Mission DefSpace and the Defence Space Agency extend the same model to space-based surveillance and communication.

The industrial base: who actually produces

• DPSUs: HAL (aircraft, engines), BEL (electronics, radars, Akash systems), BEML, BDL (missiles), Mazagon Dock Shipbuilders (submarines, destroyers), GRSE, Goa Shipyard, Hindustan Shipyard, MIDHANI (special alloys).
• Ordnance Factory Board corporatisation: OFB was dissolved and its 41 factories grouped into seven defence PSUs from 1 October 2021 — Munitions India, Armoured Vehicles Nigam (AVNL), Advanced Weapons and Equipment India (AWEIL), Troop Comforts, Yantra India, India Optel and Gliders India. Objective: commercial accountability, exports and competitiveness; resisted by federations on job-security grounds, with employee service conditions protected on deputation terms.
• Private sector: Tata Advanced Systems, L&T, Mahindra Defence, Bharat Forge/Kalyani, Adani Defence, Ashok Leyland Defence, Solar Industries, plus a wide MSME tier of some thousands of suppliers. Private industry now accounts for roughly a fifth to a quarter of value of production — the exact share is published annually by MoD.
• Licensing: industrial licences for defence items are issued by DPIIT under the Industries (Development and Regulation) Act, 1951, except small arms and ammunition which fall under the Arms Act, 1959 and Arms Rules, 2016, licensed by the Ministry of Home Affairs. Validity and the "defence products list" were liberalised to reduce items needing a licence.
• FDI: up to 74% through the automatic route and beyond that up to 100% through the government route where it brings modern technology (liberalised in September 2020, from 49% automatic). Actual FDI inflow into defence manufacturing has remained modest relative to the headline cap.
• Testing and standards: the Defence Testing Infrastructure Scheme part-funds industry-run test facilities; qualification follows JSS (Joint Services Specifications) and DGQA/DGAQA/DQA(N) quality assurance, with Indian Standards used for materials and general engineering. Certification of military airworthiness is by CEMILAC.

Demand-side instruments: lists, earmarks, portals, offsets

• Positive indigenisation lists (PILs): items that may not be imported after a stated date. MoD has notified five lists covering 509 major items (platforms, weapons, ammunition) and the DPSUs have notified five lists covering several thousand line-replacement units, sub-systems and components. Published counts are updated as new lists are issued.
• Domestic procurement earmark: a fixed share of the capital acquisition (modernisation) budget is reserved for procurement from domestic industry — raised in stages to 75% in recent years (FY2023-24 onward), within which a portion is reserved for domestic private industry and for iDEX/start-ups and DRDO-developed items.
• SRIJAN portal: an indigenisation dashboard where DPSUs and the Services list imported items and industry offers to make them.
• Defence industrial corridors: Uttar Pradesh (nodes at Aligarh, Agra, Jhansi, Kanpur, Chitrakoot, Lucknow — the BrahMos-NG facility at Lucknow was inaugurated in May 2025) and Tamil Nadu (Chennai, Hosur, Coimbatore, Salem, Tiruchirappalli), with state defence manufacturing policies offering land and capital subsidies.
• Offsets: under DAP 2020 an offset obligation of 30% of the estimated contract cost applies to Buy (Global) and Buy & Make contracts above ₹2,000 crore, discharged by buying Indian goods/services, investment or technology transfer, with multipliers for MSMEs and specified technologies, and offset banking of credits. DAP 2020 removed offsets from inter-governmental agreements, government-to-government and single-vendor procurements, following CAG criticism that offsets had delivered little actual technology.
• Emergency procurement (EP): successive tranches with delegated financial powers and short timelines, used heavily after Galwan (2020) and again around Operation Sindoor (May 2025), which put indigenous systems such as Akash, Akashteer air-defence control and indigenous counter-drone systems to operational test and became the standard current example in answers.

Exports, export control and results

• Production value: value of defence production crossed ₹1.27 lakh crore in FY2023-24 and about ₹1.51 lakh crore in FY2024-25, against a stated target of ₹3 lakh crore by 2029.
• Exports: rose from about ₹686 crore in FY2013-14 to about ₹23,622 crore in FY2024-25, against a target of ₹50,000 crore by 2029. India exports to over 80-100 countries; the headline deal is the BrahMos supply to the Philippines (first battery delivered April 2024). Exports are majority-private-sector by value.
• What is exported: largely components, sub-systems, ammunition, electronics, simulators and small platforms rather than complete major weapon systems — a key qualification to the growth figure.
• Export control: authorisations are issued by the Department of Defence Production; dual-use and munitions items are controlled through the SCOMET list under the Foreign Trade (Development and Regulation) Act, 1992 and the Foreign Trade Policy, with Open General Export Licences for specified parts to specified countries. India adheres to MTCR, Wassenaar and Australia Group (not NSG).
• Flagship programmes to quote: Tejas Mk1A (83 aircraft contracted 2021, a further 97 contracted later), LCH Prachand, ATAGS artillery, Arjun Mk1A, Pinaka, Akash and QRSAM, Dhruv/ALH, INS Vikrant (CSL, about 76% indigenous content), Project 17A frigates, Kalvari-class submarines (MDL), and the AMCA fifth-generation fighter, whose 2025 execution model opens the development partnership to competitive bidding by public and private industry.
• Limitations and criticism: long AoN-to-contract cycles; repeated slippage in engines (Kaveri), aero-engine and semiconductor dependence; IC measured on cost rather than technology, so a high IC figure can still sit on imported critical components; DRDO project delays; thin R&D spend (a small share of the defence budget); low actual FDI; MSME payment and qualification difficulties; and single-vendor outcomes in several categories.

Key points

• Make in India (defence) - launched 25 September 2014; the defence pillar is "atmanirbharta" in design, production and sustainment.
• DAP 2020 - current capital acquisition procedure, effective 1 October 2020, replacing DPP 2016; revenue buys follow the Defence Procurement Manual.
• Category order - Buy (Indian-IDDM) → Buy (Indian) → Buy and Make (Indian) → Buy (Global-Manufacture in India) → Buy (Global).
• Indigenous content - 50% for IDDM, 50/60% for Buy (Indian), 50% for Buy & Make (Indian) make-portion, 50% for Global-Manufacture in India, 30% for an Indian vendor under Buy (Global).
• AoN - Acceptance of Necessity granted by the Defence Acquisition Council, chaired by the Defence Minister; the first formal gate of any acquisition.
• Make-I / Make-II / Make-III - government-funded prototype (70%, cap ₹250 crore) / industry-funded with assured order / ToT-based import substitution.
• iDEX and DIO - startup and MSME route through Defence India Startup Challenges; SPRINT (Navy) and ADITI (deep tech) are its sub-schemes.
• TDF - DRDO-run industry R&D fund, per-project ceiling raised to ₹50 crore.
• OFB corporatisation - 41 ordnance factories became seven DPSUs on 1 October 2021 (MIL, AVNL, AWEIL, Troop Comforts, Yantra India, India Optel, Gliders India).
• Positive indigenisation lists - import embargo by date; five MoD lists (509 items) and five DPSU lists (several thousand sub-systems).
• Domestic earmark - about 75% of the capital acquisition budget reserved for domestic industry in recent years, with sub-shares for private industry and iDEX/DRDO items.
• FDI - 74% automatic, up to 100% by government route for modern technology (since September 2020).
• Offsets - 30% of estimated cost above ₹2,000 crore for Buy (Global); not applicable to IGA, G2G and single-vendor deals under DAP 2020.
• Strategic Partnership Model - submarines, fighter aircraft, helicopters, armoured vehicles; one Indian partner per segment.
• Defence corridors - Uttar Pradesh (six nodes) and Tamil Nadu (five nodes).
• DPEPP 2020 - policy document setting turnover and export goals and listing reforms across procurement, R&D, quality and exports.
• Exports - about ₹23,622 crore in FY2024-25 from about ₹686 crore in FY2013-14; target ₹50,000 crore by 2029.
• Key weakness - aero-engines, high-end sensors, semiconductors and critical materials remain imported, so cost-based IC overstates technological depth.

Formulas and examples

Example 1 - indigenous content qualification. An Indian vendor bids ₹1,000 crore (base price, taxes excluded) for a radar under Buy (Indian-IDDM). Imported content: transmit-receive modules ₹260 crore, foreign design service ₹40 crore, imported raw material ₹50 crore.

• Total imported content = 260 + 40 + 50 = ₹350 crore.
• IC = (1,000 − 350)/1,000 × 100 = 65%.
• 65% ≥ 50%, so it qualifies for IDDM. If the same bid were categorised Buy (Indian) with a non-Indian design, the threshold would be 60% — still met.

Example 2 - the bid that fails. Same radar, but imported modules cost ₹470 crore and other imports ₹80 crore, on a base price of ₹1,000 crore.

• Imported content = ₹550 crore → IC = (1,000 − 550)/1,000 = 45%.
• Fails the 50% IDDM threshold; the vendor must either re-source modules domestically or bid in a lower-preference category.

Example 3 - offset obligation. A Buy (Global) contract with a foreign OEM is estimated at ₹5,000 crore through open competition.

• Offset = 30% × 5,000 = ₹1,500 crore.
• If ₹200 crore is discharged through an MSME supplier carrying a 1.5 multiplier, the credit earned = 200 × 1.5 = ₹300 crore, so ₹1,200 crore of obligation remains.
• If the same ₹5,000 crore were bought under a government-to-government agreement, offsets would not apply under DAP 2020.

Example 4 - Make-I funding split. An Indian firm's prototype development cost for an unmanned ground vehicle is ₹300 crore.

• 70% of 300 = ₹210 crore, which is below the ₹250 crore cap → Govt pays ₹210 crore, industry ₹90 crore.
• If development cost were ₹400 crore, 70% = ₹280 crore but the cap binds → Govt pays ₹250 crore (62.5%), industry ₹150 crore.

Example 5 - export growth rate. Exports rose from ₹686 crore (FY2013-14) to ₹23,622 crore (FY2024-25), i.e. 11 years.

• Growth multiple = 23,622 ÷ 686 ≈ 34.4 times.
• CAGR = (34.4)^1/11 − 1 ≈ 38% per year.
• To reach ₹50,000 crore by FY2028-29 (4 more years) needs (50,000/23,622)^1/4 − 1 ≈ 20.6% per year — a lower rate than achieved, but on a much larger base.

Where it is used

• DPSUs and ordnance PSUs: HAL, BEL, BDL, MDL, GRSE, MIL, AVNL — roles in procurement, indigenisation cells (SRIJAN listings), vendor development, quality assurance and export marketing.
• Private defence and aerospace firms: Tata Advanced Systems, L&T Defence, Bharat Forge, Adani Defence, Solar Industries — offset management, licensing and compliance, supply-chain localisation, SCOMET export documentation.
• Government and policy roles: Department of Defence Production, DRDO, DGQA/DGAQA, Defence Attaché and acquisition wings; questions on DAP categories and IC rules recur in interviews and departmental exams.
• Think tanks and research: MP-IDSA, CLAWS, ORF, Takshashila — analysis of SIPRI import data, budget share, indigenisation outcomes; a standard dissertation area for Defence and Strategic Studies students.
• Competitive exams: UPSC CSE (GS-III internal security and economy), CDS, CAPF, state PSCs and defence-related recruitment regularly ask about PILs, corporatisation, FDI caps and export figures.
• Defence journalism, consulting and banking: sector coverage of order books, Make-II pipelines and corridor investment; project finance and due diligence for defence MSMEs.

Interview questions

• Q: What does "Buy (Indian-IDDM)" mean and why is it the first preference? A: Indigenously Designed, Developed and Manufactured, with at least 50% indigenous content; it is first because design authority, not just assembly, stays in India, which secures upgrades and spares.
• Q: How is indigenous content measured, and what is wrong with that measure? A: As the share of base contract price that is not imported material, components or services. Being cost-based, a system can show high IC while its critical sub-systems — engines, seekers, chips — are imported.
• Q: What changed when OFB was corporatised? A: From 1 October 2021 its 41 factories became seven defence PSUs with their own boards, so they carry commercial accountability, can bid competitively and export, while employee service conditions were protected.
• Q: Why did DAP 2020 drop offsets for government-to-government deals? A: Because offsets in such deals were found, including by CAG, to deliver little genuine technology transfer while raising contract prices; removing them was expected to lower cost.
• Q: What is a positive indigenisation list? A: A notified list of items that may not be imported after a given date, which guarantees domestic demand and gives Indian industry time to develop the item.
• Q: Difference between Make-I and Make-II? A: Make-I is government-funded prototype development (up to 70%, cap ₹250 crore) for complex systems; Make-II is industry-funded with no grant but an assured order if the prototype meets requirements.
• Q: India's FDI policy in defence? A: Up to 74% under the automatic route and beyond that to 100% with government approval where modern technology is brought; liberalised in September 2020, though realised inflows remain small.
• Q: Is India self-reliant in defence today? A: No. Production and exports have grown sharply and several platforms are indigenous, but aero-engines, advanced sensors, semiconductors and some munitions components are still imported, and SIPRI still ranks India among the largest importers.
• Q: What does the Strategic Partnership Model do? A: It selects one Indian private company per segment — submarines, fighters, helicopters, armoured vehicles — to partner a foreign OEM and build a long-term domestic production ecosystem.
• Q: Which agency grants a defence industrial licence? A: DPIIT under the Industries (Development and Regulation) Act, 1951, except small arms and ammunition, which are licensed by the Ministry of Home Affairs under the Arms Act, 1959.
• Q: Give one current example of indigenous equipment proving itself operationally. A: During Operation Sindoor in May 2025 indigenous air-defence and counter-drone systems, including Akash and the Akashteer control network, were employed, and emergency procurement powers were used to replenish stocks.
• Q: What is the main criticism of the indigenisation drive? A: That it substitutes assembly for technology — long procurement cycles, low R&D spend and DRDO delays mean critical technologies are still bought in, while IC percentages make the shift look larger than it is.

Common mistakes

• Treating DPP 2016 and DAP 2020 as the same document, or quoting DPP-era indigenous content percentages (DAP 2020 raised them by roughly 10 points).
• Confusing Make-III (manufacture under ToT for import substitution) with design-and-development Make-I/II.
• Saying offsets apply to every large foreign contract — they do not apply to IGA, G2G or single-vendor procurements under DAP 2020.
• Quoting the 74% FDI cap as "100% automatic"; beyond 74% needs government approval.
• Mixing up production value (about ₹1.51 lakh crore in FY2024-25) with exports (about ₹23,622 crore) or with the total defence budget (about ₹6.81 lakh crore in FY2025-26).
• Using the export growth multiple as proof of self-reliance without noting that most exports are components and sub-systems, not complete major platforms.
• Writing that corporatisation privatised the ordnance factories — the seven successors are wholly government-owned PSUs.
• Quoting PIL item counts without saying which lists are counted; MoD lists (509 items) and DPSU lists are separate and are periodically extended.

Related topics

India's foreign policy · The United Nations and international organisations · India's national security architecture and higher defence organisation · Arms control, export control regimes and SCOMET · Defence economics and the defence budget · India's strategic partnerships and defence diplomacy