India is pursuing self-reliance in its defence future, with Micro, Small, and Medium Enterprises (MSMEs) playing a leading role in the ‘Atmanirbhar Bharat’ initiative. This commitment was reinforced at the Defence MSME Conclaves 2025–26, notably at the Mysuru, Karnataka event on January 20, 2026. The conclave’s theme, “Enhancing Contribution of MSMEs to Defence Manufacturing, Export Promotion and Indigenization,” highlighted the government’s dedication to fostering innovation, collaboration, and self-reliance in India’s defence and aerospace sectors.
The conclave was organized by the Department of Defence Production (DDP) under the Ministry of Defence (MoD), in collaboration with the Federation of Indian Chambers of Commerce & Industry (FICCI) and Hindustan Aeronautics Limited (HAL). Its objective was to energize MSMEs nationwide, integrate them into the defence supply chain, and provide them with knowledge, resources, and connections to meet domestic needs and become global defence manufacturing and export players.
The ‘Atmanirbhar Bharat’ vision is transforming India’s defence manufacturing and export landscape by building a robust indigenous ecosystem that promotes innovation, creates high-skill employment, drives technological advancement, and fuels economic growth. Indian Defence and Aerospace MSMEs are central to this transformation.
The sector is projected for significant expansion, with capital expenditure expected to reach $250 billion over the next decade. India aims for a ₹1.75 lakh crore (approx. $21 billion) turnover in aerospace and defence manufacturing by 2025, with exports targeting ₹35,000 crore (around $4.2 billion). Defence exports reached a record ₹21,083 crore ($2.63 billion) in FY 2023–24, a 32.5% year-on-year increase and a 31-fold surge in a decade, with projections for ₹23,622 crore in FY2025. This growth positions Indian Defence and Aerospace MSMEs at the forefront of achieving national strategic objectives and global recognition.
Force Multipliers: The Indispensable Role of Indian Defence and Aerospace MSMEs
Indian Defence and Aerospace MSMEs are vital ‘force multipliers’ for India’s defence manufacturing, providing depth, agility, and resilience to the defence supply chain, particularly in Tier II, III, and IV segments. As of the 2023–2024 report of the Standing Committee on Defence, approximately 14,000 MSMEs and 329 startups are contributing significantly. Their agility, innovation, and cost-effectiveness are crucial for developing advanced defence technologies like electronics, precision components, software, and specialized materials.
These enterprises drive innovation and adapt quickly to defence requirements. Their ability to customize solutions and respond with speed makes them ideal partners for Defence Public Sector Undertakings (DPSUs) and private Original Equipment Manufacturers (OEMs). The rapid growth in MSME participation, with over 16,000 firms now engaged in defence, validates government initiatives and signifies a shift towards a diversified, resilient, and robust indigenous defence industrial base for India’s strategic autonomy.
Catalyzing Growth: Key Policy Initiatives Empowering Defence MSMEs
The Indian government has implemented comprehensive policies and schemes to boost MSME participation in the defence sector, forming the foundation of the ‘Atmanirbhar Bharat’ vision.
Strategic Frameworks for Indian Defence and Aerospace MSMEs
- Defence Acquisition Procedure (DAP) 2020: Earmarks procurement orders up to ₹100 crore annually exclusively for MSMEs, simplifying processes and ensuring market access.
- Innovations for Defence Excellence (iDEX) (launched 2018): Provides grants and funding to MSMEs, startups, and R&D institutions for defence innovation. Over 400 MSMEs and startups are engaged, facilitating $241 million in procurement.
- Technology Development Fund (TDF): Offers financial backing of up to ₹10 crore (strategically up to ₹50 crore) per project for indigenous defence technology development. 78 projects are underway with $40 million committed.
- Public Procurement Policy for MSMEs (2012): Mandates that 25% of all procurement by DPSUs must come from MSMEs, ensuring consistent demand.
- Defence Offset Guidelines: Incentivizes global manufacturers to partner with Indian MSMEs as Indian Offset Partners (IOPs) with a 1.5 multiplier, promoting technology transfer and skill enhancement.
- “Make in India” & “Atmanirbhar Bharat” Initiatives: Champion domestic manufacturing through procurement categories like Buy-Indian Designed, Developed and Manufactured (IDDM), Make-I, and Make-II. Make-II supports prototype development with guaranteed procurement post-successful trials.
- Targeted Outreach Programs: DDP conducts conclaves, seminars, and workshops in Tier II and III cities (like Mysuru) to raise MSME awareness and foster direct interaction with procurement agencies.
- SRIJAN Portal: An online indigenization platform enabling MSMEs to identify items for domestic manufacturing and streamlining communication among PSUs, ordnance factories, and private players.
- Positive Indigenisation Lists: Government-released lists embargoing imports of specific defence items create captive markets for domestic manufacturers.
- Defence Production and Export Promotion Policy (DPEPP) 2020: Focuses on achieving greater self-reliance in defence production and promoting defence exports.
Building a Future-Ready Ecosystem: Strengthening Regional Defence Capabilities
Developing a future-ready defence and aerospace ecosystem requires national efforts to cultivate robust regional capabilities through investments in infrastructure, industrial corridors, and tailored skill development programs.
Defence Industrial Corridors (DICs)
Strategic DICs in Uttar Pradesh and Tamil Nadu concentrate defence manufacturing, boost domestic production, attract investment, and foster collaboration. As of February 2025, these corridors have secured over ₹8,658 crore in investments and signed 253 MoUs, with an estimated potential of ₹53,439 crore. DICs offer Indian Defence and Aerospace MSMEs advantages like access to advanced shared infrastructure, a skilled workforce, and networking opportunities.
Modernization and Indigenization
India’s defence budget of over ₹6.2 lakh crore in FY 2025–26 prioritizes modernization and indigenization. The success of indigenous platforms like the LCA Tejas, Arjun Main Battle Tank, and Akash missile system creates opportunities for MSMEs across the value chain, from supplying components to providing maintenance and support.
International Collaborations
India is forming strategic partnerships with global defence manufacturers and allied nations (including the UAE) to deepen cooperation in areas like unmanned systems, naval platforms, precision munitions, cyber defence, AI, and space technologies. Joint ventures (e.g., Tata-Boeing, GE Aerospace-HAL) integrate global best practices and elevate indigenous capabilities. These ventures often require localized supply chains, creating significant opportunities for Indian Defence and Aerospace MSMEs.
Mysuru: A Hub for Defence and Aerospace Innovation
Mysuru, Karnataka, was strategically chosen for the Defence MSME Conclave 2025–26 due to Karnataka’s robust industrial base, skilled workforce, and flourishing aerospace sector. Mysuru is emerging as a hub for precision engineering and IT. The conclave aimed to leverage these regional strengths, integrate Karnataka’s MSME ecosystem into the national defence agenda, and promote indigenization and export from the region, fostering equitable industrial growth and specialized centers of excellence.
Collaborative Power: Key Stakeholders Driving India’s Defence Self-Reliance
The success of ‘Atmanirbhar Defence’ relies on the collaborative synergy among governmental bodies, industry associations, and public sector undertakings.
Department of Defence Production (DDP)
The DDP, the Ministry of Defence’s primary body, spearheads defence self-reliance by designing policies and programs to promote indigenous production and MSME integration. Its outreach, like the Mysuru conclave, disseminates information, addresses concerns, and fosters interaction between MSMEs and procurement agencies, aiming to make India a global hub for advanced defence components.
Federation of Indian Chambers of Commerce & Industry (FICCI)
FICCI acts as a bridge between the government and the private sector. Through seminars and conclaves, it aligns industry capabilities with defence requirements and ensures MSME voices shape policy. FICCI champions indigenous manufacturing and cultivates relationships between industry and the defence establishment.
Hindustan Aeronautics Limited (HAL)
As a leading Defence Public Sector Undertaking, HAL is at the forefront of India’s aerospace and defence manufacturing. HAL actively collaborates with the private sector in manufacturing, R&D, and public-private partnerships. Its support for initiatives like the Defence MSME Conclaves demonstrates a commitment to cultivating a strong vendor base, modernizing the MSME ecosystem, and nurturing globally competitive aerospace suppliers. HAL’s experience and infrastructure offer valuable support and opportunities for smaller enterprises.
Charting the Course: Opportunities and Challenges for Indian Defence and Aerospace MSMEs
The landscape for Indian Defence and Aerospace MSMEs presents both significant opportunities and inherent challenges.
Navigating Challenges
MSMEs face hurdles such as limited access to capital and credit, impacting growth. Persistent payment delays affect liquidity. Gaps in technical expertise and a shortage of specialized skilled labor hinder complex project execution. Navigating stringent regulations, certification processes, and complex acquisition procedures is daunting. High initial investment in advanced testing infrastructure and rigorous quality standards also pose entry barriers.
Seizing Opportunities
Opportunities are immense and expanding due to surging demand for indigenous defence solutions driven by national security and ‘Atmanirbhar Bharat’. A strategic policy earmarks approximately 70% of the capital acquisition budget for the domestic industry, assuring MSMEs a substantial share in defence modernization. Continuous armed forces modernization offers robust, long-term growth. India’s increasing defence export prowess opens avenues for global expansion.
To capitalize on this potential, continuous efforts are needed to enhance access to tailored financial solutions, streamline procurement processes, implement specialized skill development programs, and foster stronger collaborations between MSMEs, large defence primes, and government agencies. Awareness campaigns and platforms like the Defence MSME Conclaves are vital for keeping MSMEs informed, engaged, and empowered.
Conclusion
India’s vision for a future-ready defence and aerospace ecosystem, based on self-reliance and global leadership, is materializing with Indian Defence and Aerospace MSMEs as key drivers of innovation and national purpose. The Defence MSME Conclaves 2025–26, particularly the Mysuru event, underscored the government’s commitment to empowering these enterprises.
Policies like DAP 2020, iDEX, and TDF, complemented by infrastructure initiatives like Defence Industrial Corridors, are continuously evolving to empower MSMEs. The synergistic efforts of the DDP, FICCI, and HAL are crucial in cultivating an environment where MSMEs can thrive, contribute to indigenous manufacturing, boost defence exports, and advance technological capabilities. As India progresses towards becoming a major global defence power, the contributions of its MSMEs are foundational to achieving true ‘Atmanirbhar Bharat’. The future of Indian defence and aerospace is inextricably linked to the prosperity, ingenuity, and innovation of its micro, small, and medium enterprises, ensuring a secure and self-reliant nation.
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