The Indian defense market is on an accelerated growth path, with its size estimated at USD 17.40 billion in 2024, and projected to reach USD 23.05 billion by 2029. This growth, at a robust CAGR of 5.79% during the forecast period according to Mordor Intelligence Report, underscores India’s strategic shift towards modernization and self-reliance in defense technologies.
Modernization and Indigenous Production
The Indian government’s vigorous push for indigenous production aligns with its “Make in India” initiative. This initiative fosters partnerships with domestic and international defense companies, aiming to enhance capabilities and reduce dependency on imports. India’s defense needs are primarily driven by border conflicts with neighboring countries such as China and Pakistan. The ongoing disputes at the Line of Actual Control (LAC) with China and similar tensions with Pakistan necessitate substantial procurement of large-caliber munitions and advanced military equipment.
According to the 2022 report by the Stockholm International Peace Research Institute (SIPRI), India was the fourth largest defense spender globally, with an expenditure of USD 81.4 billion. A significant driver of this market is the consistent increase in the nation’s defense budget. For 2023-2024, the Indian government allocated USD 19.64 billion for new weapons and platforms, alongside an investment of USD 2.79 billion in defense-related research and development to promote indigenous manufacturing under the “Atmanirbhar Bharat” initiative.
Challenges and Market Dynamics
Despite the growth prospects, India’s limited indigenous capabilities in advanced defense technologies necessitate reliance on foreign suppliers for critical components. This dependency poses vulnerabilities in the supply chain, potentially impacting security and procurement timelines.
Air Force Segment: Leading the Modernization Efforts
The Air Force segment is anticipated to hold the highest market share during the forecast period. This growth is driven by the modernization of aircraft capabilities and the delivery of various aircraft, including the Dassault Rafale, Ilyushin Il-76 (A50E) (AEW), HAL Tejas LCA Mk1, and others. Notably, India’s AMCA project, expected to see its first flight between 2025 and 2026, and the development of a new 13-ton-class helicopter by HAL are significant strides towards self-reliance in aircraft manufacturing.
Additionally, the Indian Air Force (IAF) plans to continue its requirement for 114 Medium Multi-role Combat Aircraft (MMRCA) 2.0, valued at an estimated USD 18-20 billion. Investments in air defense capabilities, such as the Akash SAM, S-400, and IAI MRSAM programs, further drive this segment’s growth.
Naval Vessel Segment: Strengthening Maritime Defense
The naval vessel segment is poised to exhibit the largest market share during the forecast period, supported by India’s rising defense expenditure. The Indian Navy, with 181 surface vessels and 18 submarines, plays a crucial role in protecting the country’s maritime borders. The Navy is also exploring innovative solutions, such as unmanned vessels and underwater systems.
Significant developments include the commissioning of the INS Sandhayak, a survey vessel, and the ongoing construction of 67 ships under the Make in India initiative. These efforts highlight the Navy’s focus on enhancing its capabilities and safeguarding India’s maritime interests.
The Indian defense market is semi-consolidated, with key players such as Bharat Electronics Limited (BEL), Hindustan Aeronautics Limited (HAL), Defense Research and Development Organisation (DRDO), Rostec, and Airbus SE. The Make in India initiative has catalyzed numerous partnerships between foreign and local manufacturers, including significant alliances like:
– Hinduja Group, Ashok Leyland, and Elbit Systems Ltd.
– Tata Motors with Bharat Forge and General Dynamics for military vehicles.
– India and Russia for Frigates and AK-203 Assault Rifles.
– Boeing’s partnership with HAL and Mahindra for F/A-18 Super Hornet fighters.
These collaborations, along with the development of indigenous technologies by public firms, are expected to enhance the market share of local players during the forecast period.
The Indian defense market is set for substantial growth, driven by increased defense spending, modernization initiatives, and a strong push for self-reliance. While challenges remain in terms of technological dependencies, strategic investments and partnerships are poised to fortify India’s defense capabilities, ensuring robust market growth through 2029.
