In pursuit of self-reliance

Even though the Indian policymakers have periodically articulated lofty goals of self-reliance, they have not institutionalised a robust methodology to measure it

9 min read

Updated On: Aug 10 2026 | 6:20 AM IST

Laxman Kumar Behera

Industrial machines manufacturing components for arms and other weapons at an Indian factory (Photo: KALYANI SYSTEMS)

The Modi government, after coming to power in 2014, has made self-reliance a core pillar of India’s defence policy. To climb the self-reliance ladder, the government has unleashed a plethora of reforms under the Make in India initiative and Atmanirbhar Bharat Abhiyaan. The reforms unleashed have begun to yield positive results, with India’s defence production and exports showing encouraging results year after year. By the end of 2025-26, the defence industry’s combined production hit a record ₹1.78 trillion, a 140 per cent jump from ₹74,054 crore in 2016-17. The latest defence production amounts to 3.8 per cent of India’s total manufacturing gross value added (GVA). More encouragingly, defence exports, which were almost negligible a decade ago, have jumped 25 times over the same period, from ₹1,522 crore to over ₹38,420 crore.

Behind this number lies the growing capability of the Indian arms industry, which has grown manyfold since the country’s independence, when it had a rudimentary industrial base. Today, the industry boasts a vast enterprise that includes not only traditional government-owned/controlled entities, but also a growing number of private players, including small and medium enterprises and startups.

The Indian arms industry now designs /manufactures a range of weapons and systems, spanning ballistic and tactical missiles, fighter aircraft, tanks, ships and submarines, electronics, rockets and a variety of ammunition.

The journey

Independent India’s defence production began with a modest industrial setup comprising 18 Ordnance Factories, an aircraft factory, and a few testing facilities (the latter were merged to form the Defence Research and Development Organisation or DRDO in 1958). The autarkic industrial policy that the independent India followed soon after independence kept the defence industry, along with sectors like space, atomic energy, railway and heavy industry, under the tight leash of government control. An ambitious self-sufficiency model drove the industry, the high point of which was India’s attempt to develop a combat aircraft, HF-24 Marut.

The 1962 debacle in the war with China was a rude awakening not just for India’s security planners, but also for the defence industry, which was found wanting in meeting the defence forces’ requirements.

FY26 arms production hits record ₹1.78 trn; pvt sector share nears 25%

In a move to quickly enhance India’s defence preparedness to counter evolving threats, substantial resources were devoted to defence, including the ramp-up of indigenous defence production. Several new Ordnance Factories and Defence Public Sector Undertakings (DPSUs) were set up, along with new labs under the DRDO. However, the modus operandi of India’s arms production post-1962 war with China was licensed production. The Cold War politics of the time led to a long and entrenched defence partnership with the Soviet Union, which was happy not only to supply arms directly to the Indian armed forces but also to transfer their technologies to manufacture them in India.

A major milestone in India’s license-based manufacturing was the MiG-21 fighter, produced by Hindustan Aeronautics Limited (HAL). This was subsequently adopted across other major weapon platforms and became entrenched in India’s defence manufacturing approach for decades to come.

Realising the pitfalls of excessive dependence on foreign technologies, India in the 1980s switched gears and attempted to develop its own major armaments indigenously. At the same time, it also sought to move away from purely license-based production towards co-producing weapons in partnership with foreign collaborators. The Integrated Guided Missile Development Programme and the light combat aircraft (LCA) programme, sanctioned in the 1980s, heralded India’s forays into self-reliance through indigenous design and development. The Indo-Russian joint venture to produce the BrahMos missile laid the foundation of the co-production model. The model has been extended to several other programmes and partners, including short-range and medium-range surface-to-air missile systems with Israel.

All the while, however, the Indian state-owned entities — DPSUs and the Ordnance Factories — remained solely responsible for India’s self-reliance. The private sector was a no-go area for arms production, even though the Indian government dismantled the License-Permit-Quota Raj in 1991 and allowed private players across economic sectors.

It took 10 more years after India’s 1991 economic liberalisation for the defence industry to be finally opened to the private sector. However, the liberalisation announced in 2001 by the Atal Bihari Vajpayee government subjected private-sector participation to a stringent industrial licensing process, which proved a major hindrance.

The Modi government, soon after coming to power in 2014, announced several reforms, beginning with easing the licensing process. This was followed by an increase in the foreign direct investment cap, a simplified, domestic-industry-friendly procurement manual, an export promotion measure, five positive indigenisation lists, innovation schemes for startups, a policy for indigenisation of parts and components hitherto imported, and a dedicated budget for procurement from domestic industry. All of these have had a positive impact on India’s defence production, including by private players, which now account for about 25 per cent of India’s total defence production.

Industrial machinery manufactures components for arms and other weapons at an Indian factory. (Photo: Kalyani Systems)

The index

Even though the Indian policymakers have periodically articulated lofty goals of self-reliance, they have not institutionalised a robust methodology to measure it. Nor does it have a consistent set of required data for estimating the index.

A modest attempt to estimate self-reliance was nonetheless made in 1992, when the government set up a high-level self-reliance review committee under then-scientific advisor and late president A P J Abdul Kalam. The committee, which proved to be a one-time affair, defined self-reliance as the percentage share of indigenous content in the total procurement expenditure. By using this definition, the committee estimated the index at 30 per cent in 1992 and developed a plan to increase it to 70 per cent by 2005.

It is, however, to be noted that even though the committee’s self-reliance definition was apt, the exact data that went into the index’s estimation was not self-evident. To put it differently, it is unclear whether the committee used capital procurement data, revenue procurement data, or both to estimate India’s total procurement expenditure.

Similarly, it is not clear whether the committee used the direct import data (capturing imports made by the armed forces), the indirect import figures (imports made by the domestic defence industry for its production purposes), or both, to calculate India’s imports. Suffice it to say that both revenue and capital procurement figures, as well as direct and indirect import statistics, are necessary to estimate a robust and reliable index.

The existing budgetary system of the Ministry of Defence (MoD), however, does not provide all the necessary details on revenue and capital procurement, as well as direct and import data, to arrive at a precise self-reliance index. In the absence of a robust and credible official data set, sporadic information provided by the MoD to parliamentary committees and other forums has often been invoked to claim India’s self-reliance loosely.

Submitting before the Standing Committee on Defence (2025-26), the MoD has, for instance, provided India’s capital procurement expenditure figures along with the share of domestic industry and foreign suppliers for the past 10 years. The share of the domestic industry in total procurement expenditure has increased significantly, reaching a notably high 88 per cent in 2024-25.

This increasing share of domestic industry in capital procurement expenditure is not the same as India’s rising self-reliance index, though it indicates India’s progress towards

self-reliance. As referred to earlier, what is often termed domestic supplies often contain hidden imports — or indirect imports — in the form of parts, components, and raw materials that the Indian industry procures from external sources as intermediate inputs for its production.

The key reason behind the defence industry’s import dependence is its lack of depth in research and development and technological sophistication. This has led to imports of parts, components, and related items running into thousands of crores every year.

The nine old DPSUs — HAL, Bharat Electronics Ltd, Bharat Dynamics Ltd, BEML, Mishra Dhatu Nigam Ltd, Mazagon Dock Shipbuilders Ltd, Garden Reach Shipbuilders & Engineers Ltd, Goa Shipyard Ltd, and Hindustan Shipyard Ltd — which have been India’s traditional players in defence production, have spent ₹88,524 crore on import of inputs over the past five years between 2020-21 and 2024-25. This translates to an average import dependency of 27 per cent for their production, with annual dependency ranging from 23 to 30 per cent.

Import dependence of old DPSUs

The data gap

Ministry of Defence’s budgetary system does not provide all the details needed to arrive at a precise self-reliance index

A rising share of domestic industry in capital procurement expenditure is not the same as a rising self-reliance index

Domestic supplies often contain hidden imports: parts, components and raw materials

The defence industry’s imports need to be deducted from its supplies to arrive at the true self-reliance index. However, given the lack of industry-wide indirect import data, the nine old DPSUs’ import dependence could serve as a proxy for the overall industry’s import dependence. By applying this rule, the self-reliance in India’s capital procurement has progressed from 45 per cent in 2020-21 to 62 per cent in 2024-25. Though it is still below the 70 per cent target set for 2005 by the Self-Reliance Committee, it is much higher than the index estimated in 1992.

The consistent increase in India’s defence production and exports in the past decade or so is indeed a major sign of India’s rising arms manufacturing capability. The cumulative effect of various reforms taken in the past decade or so has created a robust foundation for greater self-reliance, which is estimated at 62 per cent in 2024-25.

However, this measure of self-reliance is a broad estimate and suffers from lack of reliable data on India’s overall procurement expenditure and the direct and indirect imports. Given that the Modi government has put a heavy emphasis on domestic arms manufacturing, it is desirable that the MoD put in place a robust methodology to estimate it.

It also needs to maintain a credible time-series database of procurement (both revenue and capital) and imports (direct and indirect). A credible index based on a reliable dataset would go a long way in monitoring the health of India’s arms industry.

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