Indigenisation Alone is Not Enough For Self-Reliance in Defence Production

According to a March 2026 report of the Stockholm International Peace Research Institute (SIPRI), India was the world’s second-largest importer of arms during 2021-25, accounting for 8.2% of total global materiel imports. Considering the ongoing, four-year-long war with Russia, Ukraine was unsurprisingly ranked as the world’s largest arms importer, with a share of 9.7%, while Saudi Arabia and Qatar occupied third and fourth place at 6.8% and 6.4% respectively.

India, for its part, has either been the largest or the second-largest defence equipment importer in most of SIPRI’s assessments between 2011-25. In recent years, however, it has occasionally been overtaken by Saudi Arabia and, more recently, Ukraine but despite that India’s Ministry of Defence (MoD) refuses to acknowledge these rankings. And, when questioned about them by parliament’s Standing Committee on Defence (SCoD) in December 2024, the MoD somewhat disingenuously told it that no reliable information existed confirming India as the largest arms importer.

At first glance, SIPRI’s ranking is at odds with the MoD’s own procurement data, as for several years it has increasingly prioritised indigenous materiel acquisitions. According to a March 2025 SCoD report, of the 337 capital acquisition contracts signed by the MoD between April 1, 2023 and December 31, 2024, only 12 were awarded to foreign vendors from Russia, the United States and France.

Illustration: Pariplab Chakraborty.

The financial figures reinforce this perception. During the same period, the government spent Rs 2,00,396 crore on capital acquisitions, of which equipment worth Rs 1,55,751 crore, or around 77.7%, was procured from Indian companies. This shift is partly the result of the procurement procedure’s prioritisation of domestic suppliers. So much so, that for the past three years, the government has earmarked 75% of the annual defence capital acquisition budget exclusively for such purchases locally.

Given these numbers, India’s continued appearance at or near the top of SIPRI’s global arms import rankings raises an obvious question: Why does the Sweden-based Institute still categorise India as one of the world’s largest importers of weapons?

Part of the explanation lies in the methodology used by SIPRI to measure arms transfers. Instead of calculating the monetary value of defence imports, SIPRI relies on a metric known as the trend-indicator value. This valuation system estimates the volume of transfers of major conventional weapons using a standardised unit derived from the known production costs of a representative set of military platforms. The aim is not to measure financial value, but rather to estimate the scale of military resources transferred across borders.

The MoD, by contrast, evaluates arms imports purely in financial terms. It records the value of payments made annually in foreign currency to overseas suppliers under contracts for the outright purchase of major military equipment including platforms and related kit.

Simply put, SIPRI tracks the movement of military capability, while the MoD tracks the financial flows associated with procurement contracts.

The divergence between these approaches becomes even more pronounced as India increasingly awards contracts to domestic firms to manufacture foreign-origin equipment within the country. Under procurement categories such as “Buy and Make (Indian)” – which the draft Defence Acquisition Procedure 2026 proposes to rename “Buy (Indian) and Manufacture in India” – local companies act as prime contractors while receiving transfer of technology from foreign original equipment manufacturers.

In such arrangements, the Indian firm, as the prime equipment supplier, is paid by the government in rupees. However, the same firm, in turn, typically pays its overseas collaborator in foreign currency for technology transfer, design support, specialist services, components, assemblies and often critical raw materials. These financial flows between Indian manufacturers and their foreign collaborators in foreign currencies are not captured – or registered – in the MoD’s accounting of domestic procurement.

India’s dependence on imported defence technology

Consequently, the fact that more than three-quarters of the capital acquisition budget is spent on local procurement does not necessarily prove that India’s dependence on imported defence technology has declined proportionately. And, more significantly, it does not automatically demonstrate genuine self-reliance in defence production.

Supporters of the current procurement strategy present a counterargument. They contend that the growing share of domestic procurement is indeed evidence of rising self-reliance because the MoD has systematically pushed for higher indigenous content – now proposed to be raised to 60% – in locally manufactured defence products.

In simple terms, indigenous content represents the value added within India during the manufacturing process. It includes the cost of locally sourced materials and services, labour, overheads and profit margins. But while this metric is useful for measuring domestic economic activity, it does not necessarily reflect technological autonomy as the local vendor remains hopelessly dependent on importing a wide spectrum of requirements to ensure the final integration process to operationalise the particular equipment.

A locally assembled product, for instance, may have a high indigenous content percentage while still depending critically on imported technologies, materials or components without which it cannot function. If such dependencies remain unresolved, the resulting system can hardly be considered fully self-reliant.

The European Airbus Defence and Space C295 medium transport aircraft programme provides an instructive illustration. The transports are being acquired by the Indian Air Force under a September 2024 programme that involves the delivery of 16 aircraft in fly-away condition, while the remaining 40 are under manufacture via a collaboration between Airbus and Tata Advanced Systems Limited at new facility in Vadodara.

Although the locally produced aircraft are expected to achieve indigenous content levels of around 70-75%, critical subsystems like the platforms’ Pratt & Whitney PW127G turboprop engines and several avionics components will continue to be imported for all 40 locally made transports. Operational availability of the aircraft will therefore remain dependent on the foreign supplier.

The C295 programme is far from being unique. Several major Indian defence platforms that are often cited as symbols of indigenous capability remain heavily reliant on imported technologies and components. These include the HAL flagship Tejas light combat aircraft, the HAL Dhruv advanced light helicopter, the HAL Prachand light combat helicopter, the Arjun Main Battle Tank, the under-development Zorawar Light Tank and the K-9 Vajra-T self-propelled howitzer. Even the much-touted BrahMos cruise missile relies on Russian-origin technology for critical elements like its ramjet propulsion system and certain seeker and guidance components.

In 2005-06, the MoD introduced mandatory offsets for all direct purchases from abroad above Rs 300 crore (later increased to Rs 2,000 crore). It required the foreign suppliers to plough back at least 30% of the contract value in the Indian defence sector by procuring eligible defence products manufactured by the Indian companies, invest in kind or cash in them or transfer technology to them to discharge their offset obligations.

A study carried out by New Delhi-based M.P. Institute of Defence Studies and Analyses in 2019 found that more than 90% of the offset obligations had been discharged by the foreign suppliers via direct purchase of products and services from the Indian companies and there was hardly any instance of technology transfer. The expectation that offsets will bring in technology was thus completely belied.

To be sure, the insistence on high indigenous content has helped Indian industry significantly expand its manufacturing and engineering capabilities. Domestic firms have acquired valuable experience in production, integration and supply-chain management across a wide range of defence technologies.

However, these gains have not translated equally into independent design capability or indigenous development of critical components and subsystems. It is indisputable that many Indian military industrial programmes continue to depend on imported components, specialised materials and foreign intellectual property to produce operationally viable equipment.

If India genuinely seeks to reduce its standing in global arms import rankings – and more importantly achieve meaningful defence self-reliance – it may need to adjust its policy priorities. Rather than focusing primarily on raising indigenous content percentages in locally assembled products, the greater challenge lies in enabling Indian industry to design and develop advanced technologies independently.

This would necessitate sustained investment in domestic research and development, as well as the creation of industrial ecosystems capable of producing critical components, advanced electronics and, above all, propulsion systems. Equally important would be securing reliable access to raw materials, strategic minerals and rare earth elements – resources that foreign suppliers are unlikely to transfer freely.

Without such capabilities, the foundations of India’s defence industrial base will remain chronically vulnerable. Geopolitical tensions, export restrictions or supply disruptions can easily interrupt existing production arrangements between Indian manufacturers and their foreign partners, with many such partnerships ending up only involving the transfer of limited or non-critical technologies.

Until these structural dependencies are addressed, the aspiration for genuine self-reliance in defence production will remain incomplete – and India’s position among the world’s leading arms importers may endure, regardless of how procurement statistics are interpreted.

Amit Cowshish is a former financial advisor (acquisitions), Ministry of Defence.

This piece was first published on The India Cable – a premium newsletter from The Wire – and has been updated and republished here. To subscribe to The India Cable, click here.

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