India Inc is all geared up to expand into a sector so far dominated by PSUs. ET has reported today, based on information from sources, that the government will shortly issue tenders to three private sector companies—Tata Advanced Systems Limited (TASL), Larsen & Toubro (L&T) and Bharat Forge—that have been shortlisted to develop and manufacture next-generation fighter jets under the Advanced Multirole Combat Aircraft (AMCA) programme. This is India's most ambitious defence manufacturing project, and private sector giants helming it is a clear sign of how India's defence manufacturing is undergoing a structural change. Once AMCA prototypes are proven, a larger tender would be issued by the Indian Air Force for acquisition of a significant number of jets, sources told ET.
This tender is likely to see wider industry competition, including a bid by Hindustan Aeronautics Ltd (HAL), a PSU. However, the company selected to develop the prototypes will have a natural advantage for the larger order as well. The earlier shortlist had left out HAL from the competition.
The AMCA programme will mark a watershed moment. For the first time, the most complex, capital-intensive and strategically sensitive defence platform in India, a fighter jet, may be led not by a public-sector monopoly but by private industry. This is not an isolated decision.
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Away from India's corporate giants taking up mega defence projects, smaller private players are also expanding in the defence sector. A few days ago, Defence Minister Rajnath Singh inaugurated a new defence manufacturing complex in Shirdi of a much smaller company, Pune-based Nibe Defence. The facility is expected to manufacture more than 500,000 155-mm artillery shells annually besides explosives, rockets and loitering munitions. The ammunition park signals Nibe's entry into manufacturing long-range attack systems, small arms, earth observation satellites and precision attack drones. The minister also flagged off Nibe's first Suryastra long-range multi-barrel rocket launcher system being delivered to the Indian Army. The system, made in India with technology transfer from an Israeli partner, can strike targets at a range of 150–300 km. Nibe also plans to produce a range of loitering munitions, starting from a smaller size that will hit targets at 100 km, to a larger weapon that can go up to a distance of 1,000 km.
Industry titans TASL, L&T and Bharat Forge and the upstart Nibe bookend a wider emergence of an Indian military-industrial complex (MIC), shaped by private capital, technology partnerships, exports and strategic intent.
Speaking at Shirdi, Rajnath Singh said the private sector should eventually account for at least half of India's defence manufacturing capacity, up from about 23% currently, as the government pushes to expand domestic military production. Singh said private industry brings efficiency, research capabilities and a greater willingness to take risks. Corporate India has got a call of duty and it is raring to go.
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From public monopoly to competitive defence ecosystem
For much of independent India’s history, defence production was the exclusive domain of public sector undertakings. HAL, the Ordnance Factory Board (now corporatised), and DRDO labs formed a vertically integrated system where design, testing, and manufacturing were tightly controlled by the state. While this ensured sovereignty over strategic assets, it also resulted in delays, limited innovation cycles, and chronic dependence on imports for critical platforms.
The last decade has seen a deliberate attempt to dismantle this monopoly. Procurement reforms, higher FDI limits, production-linked incentives, and the opening of core manufacturing areas such as fighters, missiles, drones and armoured platforms to private firms have reshaped the sector. The AMCA programme, if led by private industry, would represent the most decisive break from the old model: the state retaining ownership of strategic intent and intellectual property, while execution and systems integration shift to industry.
Defence manufacturing today is deeply intertwined with advanced electronics, materials science, artificial intelligence, propulsion technologies and complex software integration. These capabilities increasingly sit within diversified private conglomerates rather than traditional public-sector workshops.
Private firms are also structurally better equipped to absorb development risks. Fighter aircraft, missile systems, and naval platforms involve long timelines and uncertain outcomes. Companies like Tata, L&T, and Bharat Forge can spread this risk across civilian and defence portfolios, something public-sector units struggle to do under budgetary and procedural constraints.
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Equally important is competition. The presence of multiple private players introduces commercial discipline into a sector long insulated from market pressures. Cost control, delivery timelines, and performance benchmarks become enforceable rather than aspirational.
India recorded its highest-ever defence production of Rs 1.54 lakh crore in FY 2024–25. It was Rs 1,27,434 crore in FY 2023–24, a 174% surge from Rs 46,429 crore in 2014–15. PSUs accounted for nearly 77% of total production, while the private sector contributed 23%. The private sector's share increased from 21% in FY 2023–24.
The rise of India’s defence giants
A handful of large private companies now anchor India’s defence-industrial transformation. Tata Advanced Systems has emerged as the most comprehensive private defence integrator, with capabilities spanning aircraft assembly, armoured vehicles, aerospace structures, and electronic systems. Its discussions to supply military hardware to African and European countries, and its existing production footprint in Morocco, underscore the outward-facing nature of India’s new defence industry. Larsen & Toubro has entrenched itself as a strategic manufacturer in naval systems, submarines, missile launch infrastructure, and heavy engineering, leveraging decades of experience in nuclear and critical infrastructure projects. Bharat Forge represents a different but equally important trajectory. By converting deep expertise in metallurgy and precision manufacturing into artillery systems, armoured platforms, and ammunition, it has demonstrated how traditional industrial strengths can be repurposed for defence at scale.
Alongside them, Adani Defence and Mahindra Defence have entered missile manufacturing, unmanned systems, and electronic warfare, with drones and loitering munitions emerging as particularly dynamic entry points.
The startup and SME layer
Beneath these large integrators lies a fast-growing ecosystem of startups and specialised private firms, such as Nibe, that are reshaping how India innovates in defence. 16,000 MSMEs are emerging as game-changers, strengthening indigenous defence capabilities, as per a government estimate.
In unmanned systems, companies such as ideaForge have become significant suppliers of surveillance drones to the Indian armed forces, while NewSpace Research and Technologies is developing swarm drone and autonomous combat systems tailored to modern battlefield needs. Sagar Defence Engineering has carved out a niche in maritime drones and autonomous surface vessels, an area of increasing relevance for naval operations.
In sensors, optics, and battlefield awareness, firms like Tonbo Imaging and Paras Defence have built capabilities in night-vision systems, electro-optics, and surveillance equipment, reducing dependence on imports in critical soldier-level technologies. Data Patterns, Apollo Micro Systems, and Astra Microwave have also been making waves in the sector.
Precision weapons and munitions have also seen private-sector breakthroughs. Johnnette Technologies, for instance, has supplied loitering munitions to the Indian Army, reflecting how smaller firms can respond quickly to operational requirements through emergency procurement routes. Alpha Design Technologies, now part of the Adani Group but originally a mid-sized private firm, exemplifies how Indian companies have moved into complex aerospace and electronic systems integration long before the current policy push.
Government initiatives such as iDEX and simplified procurement pathways have enabled these firms to bypass traditional delays, test products directly with the armed forces, and scale rapidly. Collectively, they form the innovation backbone of India’s emerging military-industrial complex, feeding technologies upward to larger system integrators.
Exports, partnerships and strategic leverage
The growing role of private industry is also transforming India’s defence exports. Unlike state-owned firms, private companies are structurally incentivised to seek overseas markets, customise products, and build long-term support ecosystems. India’s defence exports surged to an all-time high of Rs 38,424 crore in the financial year 2025–26, marking a sharp rise of over 62% from the previous fiscal. Defence PSUs accounted for 54.84% of total exports, while private industry contributed 45.16%.
As India deepens trade and security engagement with Europe, Africa, and Southeast Asia, defence manufacturing becomes a tool of diplomacy as much as commerce. The India–EU trade deal could accelerate joint ventures, co-production arrangements, and European sourcing from Indian plants, embedding Indian firms into global defence supply chains. This outward orientation marks a shift from India being a buyer of last resort to a competitive supplier particularly in categories such as armoured vehicles, drones, artillery, electronics, and eventually combat aircraft subsystems.
The emergence of a private-sector-led military-industrial complex brings undeniable advantages such as speed, innovation, scalability and export potential. It also places new demands on governance. Strong oversight, transparent procurement and safeguards against excessive concentration of power will be essential to ensure that commercial incentives remain aligned with national security priorities.
