India’s Defence Exports Poised for a Global Windfall Surge

A surge in the stock market on Thursday may signal a major breakthrough for India’s defence export industry. Shares of leading defence companies such as Sika Interplant Systems, Data Patterns, Bharat Electronics Ltd (BEL), and BEML rose by up to 5% in morning trade, following a significant announcement by NATO.

At its recent summit in The Hague, NATO pledged to increase defence spending among member nations to 5% of GDP by 2035, a move that could open lucrative opportunities for Indian defence manufacturers.

Once heavily reliant on imports, India’s defence sector is rapidly transforming into a credible global supplier. A wave of policy reforms, strategic investments, and expanding industrial capabilities has pushed Indian defence exports to record levels. With NATO’s spending plans on the horizon, India’s defence industry stands poised for a potential windfall.

The intersection of NATO’s planned spending boost, Europe’s push for strategic autonomy, and India’s expanding defence manufacturing capacity has created a unique alignment of interest and opportunity. For Indian defence producers, the next decade could be truly transformational, potentially reshaping India’s position in global military supply chains.

Reliance Defence Deal Signals Incoming Windfall

Reliance Defence has secured a ₹600 crore export order from Germany’s leading defence firm Rheinmetall Waffe Munition GmbH, marking one of the largest contracts in the high-tech ammunition sector. The order follows Reliance’s recently announced strategic partnership with Rheinmetall and involves the supply of artillery shells and explosives from a new manufacturing facility to be established in Maharashtra.

This latest deal adds to Reliance Defence’s growing international portfolio, which already includes joint ventures with France’s Dassault Aviation and Thales. The company, a subsidiary of Reliance Infrastructure, has also signed a strategic cooperation agreement with Germany’s Diehl Defence to locally produce the Vulcano 155mm precision-guided munition system, an advanced artillery shell engineered for long-range, high-accuracy strikes.

Reliance Defence’s deal with Rheinmetall could signal the start of a larger windfall, as Europe’s planned increase in defence spending opens up new avenues for Indian defence manufacturers. The upcoming opportunities are expected to span across sub-systems, components, ammunition, and other military equipment, along with the potential for joint development projects.

Why India Is Emerging as a Key Defence Supplier for NATO Nations

NATO’s recent decision to boost defence spending stems from rising geopolitical instability and a renewed awareness of strategic vulnerabilities. Russia’s invasion of Ukraine has laid bare the military shortcomings of several European nations and highlighted their heavy dependence on the United States for both security guarantees and defence hardware. In response, the alliance is now pushing for greater self-reliance and rapid expansion of its military capabilities.

The plan to raise defence budgets to 5% of GDP is more than just symbolic; it represents hundreds of billions of dollars in additional annual spending across NATO countries. However, meeting this surge in demand will be challenging. European defence manufacturing capacity remains limited, and labour shortages continue to constrain output.

Adding further urgency is the recently published Draghi report on EU competitiveness. Authored by former European Central Bank President Mario Draghi, the report calls for a sweeping revitalisation of Europe's industrial base, with defence manufacturing identified as a key pillar. It strongly advocates for reducing Europe's dependency on U.S. defence imports and boosting domestic investment instead.

Yet, rebuilding this capacity will take time. In the interim, Europe will need dependable, cost-effective external partners to fill the gap, and India is emerging as a strong candidate. With its rapidly advancing defence manufacturing capabilities and strengthening diplomatic ties with Europe, India is well-positioned to become a key supplier. Additionally, as Europe expands its own defence production, it will require a robust network of component and subsystem providers, an area where India’s growing defence ecosystem, including both large firms and agile private players, can play a crucial role.

India's Arsenal Goes Global in Rapid Defence Export Surge

Under the banner of 'Atmanirbhar Bharat', India’s defence exports soared to a record ₹23,622 crore (approximately $2.76 billion) in the financial year 2024–25, marking a 12.04% increase from the previous year’s ₹21,083 crore. According to the Ministry of Defence (MoD), this impressive growth underscores India's expanding presence in the global defence market, with exports now reaching nearly 80 countries. The government has set an ambitious target of ₹50,000 crore in exports by 2029.

The current export figures represent a staggering 34-fold increase from FY 2013–14, when defence exports stood at just ₹686 crore. This dramatic rise reflects a growing international acceptance of Indian defence products and the successful integration of the sector into global supply chains.

The export performance of Defence Public Sector Undertakings (DPSUs) improved significantly, registering a 42.85% increase in FY 2024–25. DPSUs contributed ₹8,389 crore in exports, up from ₹5,874 crore the previous year. Meanwhile, the private sector remained the dominant contributor, clocking ₹15,233 crore, marginally higher than the ₹15,209 crore achieved in FY 2023–24.

The MoD attributes this growth to a series of policy reforms aimed at boosting the defence manufacturing ecosystem. These include simplified industrial licensing, deregulation of many components from licensing requirements, and extended validity for defence licenses. In addition, the Standard Operating Procedure (SOP) for export authorisation was streamlined last year, with new provisions introduced to further ease and encourage outbound shipments from Indian defence firms.

Public sector giants like Hindustan Aeronautics Limited (HAL) and Bharat Electronics Limited (BEL) have long led the charge in India’s defence exports. However, the private sector is quickly gaining ground. The entry of major players such as Larsen & Toubro, Tata Advanced Systems, and Reliance Defence has transformed the landscape, fostering a dynamic and increasingly competitive ecosystem.

India’s Advantage Lies in Cost Efficiency, Manufacturing Scale and Trust

India’s defence sector is on the cusp of significant growth, driven by shifting global dynamics and expanding export opportunities, according to a recent report by brokerage firm Nuvama. Defence exports are projected to reach ₹20,300 crore in FY25, with the government targeting ₹50,000 crore by FY29. A major boost could come as early as the first half of FY26, when European defence orders are expected to begin flowing in, a development that would mark a major milestone for India’s growing defence industry.

Europe’s push to expand its military capabilities is constrained by limited domestic manufacturing capacity and acute workforce shortages, particularly in the aerospace and missile domains. This has prompted several European nations to explore partnerships with Indian defence manufacturers, who are increasingly seen as credible collaborators rather than just low-cost suppliers.

India's edge lies in a powerful combination of cost efficiency, scalable manufacturing, and an increasingly sophisticated technological base. The country’s large, skilled workforce and expanding industrial infrastructure offer the scale that Europe currently lacks. Moreover, India’s recent strides in defence R&D, evident in projects like the Tejas light combat aircraft, BrahMos missiles, UAVs, and naval platforms, have enhanced its credibility as a provider of complete, high-tech defence solutions.

This opportunity is not merely commercial; it is also deeply geopolitical. Many European nations view India as a neutral, democratic, and strategically aligned partner, making Indian defence products far more palatable than imports from countries like China or Russia, which come with geopolitical baggage. This strategic trust could open doors to deeper collaboration, including co-development initiatives, joint ventures, and advanced partnerships in areas such as artificial intelligence, cyber warfare, electronic systems, and autonomous weapon platforms.

However, challenges remain. Indian companies must consistently meet NATO’s rigorous quality standards and ensure timely delivery, crucial in an industry where trust and reliability are non-negotiable. Regulatory hurdles, including delays in export licensing and customs clearances, still need to be addressed. Continued government support through clear policies, increased R&D funding, and streamlined export facilitation will be essential to maintain momentum.

Importantly, India must now focus on moving up the global value chain, not just supplying components and sub-systems, but offering integrated platforms and end-to-end defence solutions that cement its role as a long-term partner in global defence supply chains.

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