Delhi Policy Group policy brief, “Evolving India’s Defence Industry Through Private Sector Prime Contractors”, by Vice Admiral Anil Chopra (Retd.), (Policy Brief Vol. XI, Issue 21, published 10 August 2026), examines the weaknesses of India’s defence industrial base (DIB) and argues that genuine self-reliance requires large private-sector companies to emerge as prime contractors and system integrators alongside the Defence Research and Development Organisation (DRDO), defence public sector undertakings (DPSUs), micro, small and medium enterprises (MSMEs) and start-ups. The author’s central argument is that India has made significant progress but still cannot produce several advanced systems it requires. As the brief states, “India cannot achieve genuine self-reliance in the defence sector unless large private sector corporations emerge as prime contractors and system integrators alongside DRDO, DPSUs, MSMEs and startups”.
The brief argues that continued dependence on foreign suppliers is increasingly risky because global defence production capacity is constrained, advanced technologies are less readily transferred, and even close partners will ultimately act according to their own national interests. The author therefore presents “atmanirbharta” as a strategic necessity, while cautioning against autarky or compromising operational requirements.
India’s defence industry has expanded, with private-sector firms accounting for 23 percent of defence production in financial year 2024-25 and defence exports reaching $2.76 billion, against $2.8 billion in imports. Yet the brief argues that the DIB still falls short in producing advanced platforms and weapons at the speed and scale required. The problem, it maintains, is not a lack of MSMEs or start-ups, but the absence of sufficiently large private firms capable of integrating complex systems, managing supply chains, and taking responsibility for cost, schedule, and performance.
The brief is critical of an exclusively state-centric model. It says DPSUs remain indispensable but face structural problems including slow decision-making, diffused accountability, risk aversion, and procedural delays. MSMEs and start-ups provide innovation and manufacturing depth, but face limitations of capital, scale, programme management, certification, and long-term sustainment. Large private companies, by contrast, can bring greater access to capital, flexible management, stronger accountability, and the ability to form joint ventures with foreign original equipment manufacturers (OEMs).
The Strategic Partnership Model (SPM), introduced in 2017, was intended to create Indian private-sector system integrators for major defence programmes. However, the brief notes that no final production contract had been signed under the model in nearly a decade. It cites technology-transfer restrictions, intellectual property concerns, and procedural delays as major obstacles, while noting the recent selection of Mazagon Dock Shipbuilders Limited (MDL) and Larsen & Toubro (L&T) as Indian strategic partners for the 75I submarine project. It argues that the SPM now needs to be accelerated.
The brief proposes going beyond the SPM through assured demand, flexible contracts, financial support, and risk-sharing. It recommends grants, tax incentives, advance purchase commitments, and partial compensation for firms whose prototypes fail to secure production contracts. Procurement should move towards competitive selection, with successful firms receiving production preference and greater certainty over future orders.
The brief also calls for reform of defence research and development (R&D). DRDO should remain primarily a research and design institution, while technology should be transferred to multiple public and private manufacturers wherever possible to create competition. The 155 mm artillery programme involving Bharat Forge and Tata Advanced Systems is cited as an example. It also calls for greater prototype funding and greater private ownership of intellectual property.
Finally, the brief stresses that private-sector prime contractors alone will not transform the DIB. India must also strengthen technical education, advanced manufacturing, critical-mineral access, machine-tool production, and defence-specific skills, while absorbing technologies such as artificial intelligence (AI), robotics, and quantum technologies. Its overall conclusion is that a balanced ecosystem involving DRDO, DPSUs, MSMEs, start-ups and large private corporations is essential, with private-sector prime contractors becoming “a strategic imperative for India’s national security and strategic autonomy”.
