Tuesday 06 / October / 2026
New Delhi: India’s defence manufacturing story is increasingly being written beyond the traditional boundaries of large public-sector establishments and major private companies.
Across laboratories, technology firms, engineering units and emerging start-ups, a wider industrial network is now becoming part of the country’s defence production architecture.
The latest signal came from VIMARSH 2026, the DRDO-Industry Synergy Meet held in New Delhi on September 15, where the government unveiled measures to bring MSMEs and deep-tech start-ups closer to the core of defence research, development and manufacturing.
The developments come as India’s defence production reached a record $19 billion (₹1.78 lakh crore) in FY 2025-26, while defence exports climbed to $4.1 billion (₹38,424 crore).
The private sector accounted for 24 percent of total defence production, its highest share so far.
The emerging direction is clear: India's defence industrial base is expanding from a system dominated by large manufacturers towards a broader network in which smaller enterprises can contribute technologies, components, subsystems, specialised manufacturing and new-generation capabilities.
VIMARSH opens wider doors
At VIMARSH 2026, Defence Minister Rajnath Singh unveiled a framework designed to lower technical and financial entry barriers for MSMEs and deep-tech start-ups.
The measures include direct funding, incubation support and dedicated access to DRDO testing facilities.
A separate framework was also launched for the secure and standardised sharing of DRDO-developed software source codes with licensee industries.
The initiative is intended to support software-defined defence capabilities and help industries manage technological obsolescence more efficiently.
The event also saw nine Licensing Agreements for Transfer of Technology handed over to 13 manufacturing partners, allowing them to undertake commercial production of DRDO-developed systems.
The significance of these agreements lies in the movement of technology beyond the laboratory.
Technology transfer creates a pathway through which research outcomes can enter industrial production, allowing private manufacturers and their wider vendor networks to participate in defence programmes.
DRDO has said that more than 2,300 technology transfers have so far been handed over to more than 1,100 industries. Technologies relating to approximately 50 DRDO-developed missiles have also been made available to industry.
From suppliers to partners
The changing role of MSMEs is central to this transformation. Instead of remaining limited to supplying individual components, smaller enterprises are increasingly being encouraged to participate in research, design, testing, certification and manufacturing.
At VIMARSH, Singh called for DRDO-industry collaboration to cover the entire value chain and emphasised the need to integrate MSMEs and start-ups into defence supply chains alongside large industries.
The approach places smaller companies closer to the technology-development process rather than treating them solely as downstream vendors.
This shift also aligns with the Development-cum-Production Partner model, under which DRDO works with capable Indian manufacturers for the development and subsequent production of defence technologies.
The model creates a bridge between laboratory research and industrial-scale manufacturing.
For MSMEs, such arrangements can provide access to technologies and production opportunities that would otherwise remain concentrated within larger industrial establishments.
Start-ups enter strategic technologies
India's start-up ecosystem has also gained a more defined role in defence innovation through the Innovations for Defence Excellence, or iDEX, framework.
As of March 2026, iDEX had engaged 676 start-ups, MSMEs and individual innovators, with 551 design and development contracts signed.
Earlier in 2026, the government said 58 prototypes worth about $410 million (₹3,853 crore) had received procurement clearance and 45 procurement contracts worth nearly $247.5 million (₹2,326 crore) had been signed.
The significance of the programme extends beyond the number of participating companies. iDEX is creating a mechanism through which operational requirements can be translated into problem statements and presented to technology developers.
The ADITI scheme has expanded this ecosystem into strategic and emerging technologies.
It provides support for areas including artificial intelligence, advanced cyber technology, autonomous systems, quantum technology, semiconductors and other critical capabilities, with grants of up to $2.66 million (₹25 crore) available for eligible projects.
These programmes are helping establish a different relationship between defence users and technology developers, where start-ups can work on specific military requirements while developing technologies with wider applications.
Testing becomes an enabler
For emerging defence companies, access to specialised testing infrastructure can be as important as access to capital. Defence technologies must undergo rigorous evaluation before they can progress towards procurement and induction.
The latest VIMARSH framework places dedicated DRDO testing access among the measures intended to reduce barriers for MSMEs and start-ups.
India's Defence Testing Portal already provides domestic manufacturers, start-ups and industries access to specialised testing infrastructure across 24 DRDO laboratories.
The effort to make testing facilities more accessible fits into a larger attempt to create a smoother path from prototype to production.
A two-day defence procurement and innovation seminar held in New Delhi in June 2026 brought together more than 150 start-ups and MSMEs to familiarise them with defence procurement procedures, iDEX, indigenisation initiatives, testing, certification and user trials.
Such engagements indicate that participation in the defence sector is increasingly being built around a complete ecosystem rather than isolated procurement opportunities.
Technology transfer gains momentum
The technology-transfer push has become particularly visible in recent months.
In August 2026, the Defence Ministry approved the transfer of DRDO-developed technologies covering all conventional missile systems to the Indian defence industry for domestic production, subject to applicable qualifications, certifications and regulatory requirements.
The move was explicitly linked to expanding participation by Indian industries, including MSMEs and technology partners.
This creates opportunities for companies across different levels of the manufacturing chain.
A sophisticated defence system does not depend on a single producer; it requires electronics, materials, propulsion-related components, software, sensors, machining, communications equipment and specialised subsystems.
The widening technology-transfer network can create multiple points of entry for smaller industrial enterprises.
A larger industrial base
The numbers behind India's defence manufacturing expansion provide the broader context.
Defence production increased from $9 billion (₹84,643 crore) in FY 2020-21 to ₹1.78 lakh crore in FY 2025-26, representing a 110 percent rise.
Private industry contributed about $4.5 billion (₹42,000 crore), or 24 percent, to the latest production figure. Defence exports increased to $4.1 billion (₹38,424 crore) in FY 2025-26, with Indian defence products reaching more than 80 countries.
The government has set a target of $32 billion (₹3 lakh crore) in annual defence production and $5.32 billion (₹50,000 crore) in defence exports by 2029. The wider industrial base, including MSMEs and start-ups, is expected to form an important part of that expansion.
The private sector's increasing participation also creates greater scope for smaller companies to enter established supply chains. In FY 2025-26, private companies accounted for $1.85 billion (₹17,353 crore), or 45.16 percent, of India's defence exports.
Building global-scale enterprises
The government's recent engagement with MSMEs is also extending beyond defence procurement towards global competitiveness.
Addressing an MSME event in Greater Noida on September 1, Indian Defence Minister Rajnath Singh urged enterprises to invest part of their turnover in research, development and technology upgrading while building partnerships with universities, IITs, research institutions, DRDO laboratories, start-ups and large industries.
He highlighted drones, artificial intelligence, robotics, cybersecurity, advanced electronics, sensors, autonomous systems, advanced materials, space and quantum technologies as areas offering opportunities for Indian MSMEs.
The message places technology development alongside manufacturing capacity.
It also reflects a broader shift in India's industrial policy: MSMEs are being encouraged to move from being domestic suppliers towards becoming technology developers, system suppliers and exporters.
Defence ecosystem broadens
The evolution of India's defence industry is increasingly about industrial depth.
Large companies remain central to complex platforms and major programmes, but their production networks require thousands of specialised suppliers and technology partners.
VIMARSH 2026 brought this wider ecosystem into focus. Strategic MoUs with the Society of Indian Defence Manufacturers and Laghu Udyog Bharati were exchanged to expand industry outreach, while DRDO signed an agreement with the Quality Council of India for SAMAR 2.0, a system intended to assess and benchmark manufacturing maturity among domestic defence enterprises.
The result is an industrial structure in which research institutions, start-ups, MSMEs, academia, large manufacturers and the armed forces are being connected more closely.
India's defence industry is consequently moving towards a model where innovation does not remain confined to specialised laboratories, and manufacturing does not remain concentrated among a handful of established companies.
With technology transfers, testing access, dedicated innovation programmes and deeper industry partnerships expanding simultaneously, MSMEs and start-ups are becoming increasingly visible components of India's defence production architecture.
