Defence industry upbeat on R&D funds, domestic capability building

Industry stakeholders spanning defence, aerospace, drones and emerging technologies are looking for policy signals to address gaps and scale in the Union Budget 2026–27.

Experts highlighted that with modernisation and indigenisation likely to shape this year’s Budget, the focus may be on targeted spending and faster execution.

Subbu Venkatachalam, head of defence & aerospace, Carborundum Universal Limited, said the direction of defence spending already signals a deeper commitment to indigenous capability building.

“With nearly 75 per cent of capital procurement now directed to Indian vendors, India’s defence spending is decisively strengthening Make in India and reducing import dependence,” he said.

Venkatachalam added that ongoing capability upgrades across the Army, Navy and Air Force indicate the possibility of higher allocations, going ahead. Industry executives say this shift has changed the focus from localisation to deeper technology and materials capability.

He said: “Targeted support in this area will be central to self-reliance and national security, preparedness, as well as global competitiveness.”

Venkatachalam highlighted that improving shared testing and certification infrastructure would help reduce bottlenecks and ease pressure on the limited government facilities.

The attention is also firm on unmanned systems, with drones increasingly seen as a strategic capability across defence and civilian domains. 

Ankit Mehta, chief executive officer (CEO), IdeaForge Technology, said the sector is entering a decisive phase. “The unmanned aerial vehicle (UAV) sector stands at a pivotal juncture,” he said, pointing to the Defence Procurement Manual’s “build here, buy here” emphasis on domestic manufacturing. 

Mehta highlighted that the ~1 trillion research, development and innovation fund is a positive signal of intent, stating that it reflects the government’s attempt to strengthen research and development (R&D) and intellectual property creation.

However, industry leaders stress timely execution will be critical. Mehta called for faster rollout and disbursement of R&D funds, especially for deep-tech firms with in-house R&D commitments. 

While recent goods and services tax (GST) reforms have improved competitiveness, he believes the next Budget should broaden the incentive framework, including a production-linked incentive (PLI 2.0) that supports domestic component and system-level drone manufacturers to build a resilient ecosystem.

The new budget would allow firms to expand manufacturing capacity and deliver systems at scale.

Emerging technologies such as autonomous systems and artificial intelligence (AI) are also moving to deployment. 

Pankaj Thapa, co-founder and CEO of Mirror Security, said that as AI adoption expands across defence, finance and governance, industry attention is also shifting towards securing these systems. It added that “securing AI must become as critical as deploying it.” 

Altogether, industry expectations from Budget 2026-27 reflect a call for continuity with sharper execution.

Stakeholders are looking for focused R&D funding, stronger infrastructure, predictable procurement and assured demand to transition from labs and pilot projects to scaled deployment.