India continued to cement its position as one of the world’s most strategically important military powers in 2025, supported by a rapidly expanding defence manufacturing ecosystem. The year marked a strong alignment between military modernisation, export growth and policy-driven indigenisation, reinforcing India’s long-term defence preparedness.
In FY24, defence exports touched a record US$ 2.63 billion, registering a robust 32.5% year-on-year growth. This surge highlighted India’s growing credibility as a global defence supplier and reflected the success of its ‘Make in India’ and ‘Atmanirbhar Bharat’ initiatives in the defence space.
The Defence Acquisition Council (DAC), chaired by Defence Minister Rajnath Singh, played a pivotal role in accelerating procurement decisions through the year. On December 29, the DAC approved defence acquisition proposals worth around ₹79,000 crore, covering major upgrades for the Indian Army, Navy and Air Force.
Key approvals included the overhaul of T-90 tanks, mid-life upgrades of Mi-17 helicopters, procurement of medium-range surface-to-air missiles (MRSAM) for the Navy and Air Force, loitering munitions, and the Astra Mark II air-to-air missile system. Amendments to Requests for Proposal for aerial refuellers and AWACS aircraft were also cleared, supporting future capability expansion and indigenous manufacturing.
This meeting marked the fourth DAC sitting in 2025. Earlier, approvals included ₹1.05 lakh crore worth of capital acquisitions in July, ₹79,000 crore in October, and over ₹54,000 crore in March, underlining a sustained push to fast-track defence procurement.
The Union Budget FY26 reinforced this momentum with a ₹6.81 lakh crore allocation to the Ministry of Defence, reflecting a 9.5% increase over FY25. Capital expenditure stood at ₹1.80 lakh crore, focused on advanced weapons, aircraft, warships and military systems. An additional ₹7,146 crore was allocated to the Border Roads Organisation, highlighting strategic infrastructure priorities.
Defence production reached ₹1,50,590 crore in FY25, with defence public sector undertakings contributing ₹21,821 crore, showcasing steady domestic manufacturing growth.
Aero India 2025 emerged as a key platform for showcasing indigenous defence capabilities, startup innovation via iDEX, and international collaboration. The Defence Exhibition Organisation further strengthened global outreach through DefExpo and Aero India.
A major reform came through GST 2.0, which reduced GST on commercial drones to 5% and eliminated it entirely on military drones and critical defence equipment, improving cost efficiency and boosting supply chain localisation.
India’s defence diplomacy gained traction with the Philippines through a strategic partnership anchored by the BrahMos missile deal. Bharat Electronics Limited partnered with Israel Aerospace Industries to form a joint venture for lifecycle support of MRSAM systems, while global majors like Rolls-Royce announced plans to expand defence sourcing from India.
Private sector participation surged, with JSW Defence committing ₹800 crore for drone manufacturing, TechEagle planning ₹100 crore in UAV investments, and Paras Defence announcing a ₹12,000 crore Optics Park project in Maharashtra.
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The defence sector in 2025 reflected a decisive shift towards scale, speed and self-reliance. With record exports, rising budgets, frequent DAC approvals, and strong private and global participation, India continued its transition into a globally competitive defence manufacturing hub with enhanced operational readiness.
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Published on: Dec 30, 2025, 2:05 PM IST
Nikitha Devi
Nikitha is a content creator with 7+ years of experience in the financial domain. Specialising in personal finance, investments, and market insights, Nikitha simplifies complex financial topics, making them accessible to readers.
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