India’s defense manufacturing and export capabilities are rapidly transforming, driven by the ‘Atmanirbhar Bharat’ (self-reliant India) vision, with Micro, Small, and Medium Enterprises (MSMEs) at its core. These entities are crucial for strengthening regional capabilities and building a robust defense and aerospace ecosystem.
The Defence MSME Conclaves 2025–26, held in Mysuru, Karnataka, on January 20, 2026, focused on “Enhancing Contribution of MSMEs to Defence Manufacturing, Export Promotion and Indigenization.” Organized by the Department of Defence Production (DDP) under the Ministry of Defence (MoD), in collaboration with FICCI and supported by Hindustan Aeronautics Limited (HAL), the event highlighted the government’s commitment to fostering innovation, collaboration, and self-reliance. The conclave aimed to galvanize MSMEs, deepen their integration into the defense supply chain, and empower them with knowledge and connections.
India’s ‘Atmanirbhar Bharat’ Vision: A Strategic Imperative for Defence Manufacturing
The ‘Atmanirbhar Bharat’ vision in defense aims to reduce import dependency, bolster domestic manufacturing, and establish India as a global defense exporter. This encompasses cultivating an ecosystem that champions innovation, creates employment, and fosters technological advancement and economic growth.
The Indian defense and aerospace sector is experiencing significant expansion, with capital expenditure projected at $250 billion over the next decade. Government targets include a turnover of ₹1.75 lakh crore in aerospace and defence manufacturing by 2025, with exports reaching ₹35,000 crore. Defense 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 over a decade), projected to climb to ₹23,622 crore in FY2025. This growth positions domestic industry, especially MSMEs, at the forefront of national strategic objectives.
Force Multipliers: The Indispensable Role of Indian Defence and Aerospace MSMEs
MSMEs are recognized as “force multipliers” for India’s defense manufacturing, providing depth and resilience to the 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 contribute to defense production. Their agility, innovation, and cost-effectiveness are vital for developing advanced electronics, precision engineering, complex software, and specialized materials.
MSMEs inject dynamic energy, often leading in adopting new technologies and adapting to evolving requirements. Their ability to customize solutions and respond swiftly makes them ideal partners for Defence Public Sector Undertakings (DPSUs) and private Original Equipment Manufacturers (OEMs). The accelerating growth in MSME participation, exceeding 16,000 firms within a few years, validates government initiatives.
Catalyzing Growth: Key Policy Initiatives Empowering Defence MSMEs
The Indian government has implemented comprehensive policies to bolster MSME participation in the defense sector.
Landmark Government Policies and Schemes:
- Defence Acquisition Procedure (DAP) 2020: Earmarks orders up to ₹100 crore per year exclusively for MSMEs, simplifying procurement and enhancing integration.
- Innovations for Defence Excellence (iDEX) (launched 2018): Fosters innovation and R&D by providing grants and funding to MSMEs, startups, R&D institutes, and academia. It has engaged over 400 MSMEs and startups, facilitating procurement worth $241 million.
- Technology Development Fund (TDF): Offers financial support up to ₹10 crore (or ₹50 crore in some cases) per project for indigenous defense technology development. It has executed 78 projects with a commitment of $40 million.
- Public Procurement Policy for MSMEs (2012): Mandates an annual target of 25% procurement from MSMEs by all DPSUs.
- Defence Offset Guidelines: Incentivize global manufacturers to partner with Indian MSMEs as Indian Offset Partners (IOPs) with a multiplier of 1.5, promoting technology transfer.
- “Make in India” and “Atmanirbhar Bharat” Initiatives: Emphasize domestic manufacturing and introduce procurement categories like Buy-Indian Designed, Developed and Manufactured (IDDM), Make-I, and Make-II. Make-II encourages prototype development with guaranteed procurement upon successful trials.
- Outreach Programs: DDP conducts conclaves, seminars, and workshops in Tier II and III cities to raise awareness and facilitate interaction between MSMEs and procurement agencies.
- SRIJAN Portal: An online platform for indigenization, enabling MSMEs to identify items for domestic manufacturing and facilitating communication between PSUs, ordnance factories, and private players.
- Positive Indigenisation Lists: Periodically released lists embargoing imports of specific defense items, creating captive markets for domestic manufacturers.
- Defence Production and Export Promotion Policy (DPEPP) 2020: Provides a focused thrust for self-reliance and export promotion.
Building a Future-Ready Ecosystem: Strengthening Regional Defence Capabilities
Developing a future-ready defense and aerospace ecosystem requires cultivating robust regional capabilities through infrastructure investment, industrial corridors, and skill development.
Defence Industrial Corridors (DICs):
Established in Uttar Pradesh and Tamil Nadu, these corridors promote domestic production, attract investment, and encourage collaboration. As of February 2025, they have attracted investments exceeding ₹8,658 crore and facilitated 253 MoUs with an estimated investment potential of ₹53,439 crore. DICs provide MSMEs with access to shared infrastructure, skilled labor, and networks.
Modernization and Indigenization:
India’s defense budget surpassed ₹6.2 lakh crore in FY 2025-26, with significant emphasis on modernization and indigenization. Indigenous platforms like the LCA Tejas, Arjun Main Battle Tank, and Akash missile system are operational and ready for export, creating opportunities for MSMEs to supply components and support services.
International Collaborations:
India is forging strategic partnerships with global manufacturers and nations (e.g., UAE) to deepen cooperation in advanced technologies like unmanned systems, naval platforms, precision munitions, cyber defense, AI, and space-based technologies. Joint ventures (e.g., Tata-Boeing, GE Aerospace-HAL) integrate global best practices and enhance indigenous capabilities, often requiring localized supply chains for MSMEs.
Mysuru as a Hub for Indian Defence and Aerospace MSMEs:
The choice of Mysuru, Karnataka, for the Defence MSME Conclave 2025-26 was strategic. Karnataka’s strong industrial base, skilled workforce, and thriving aerospace sector offer immense potential. Mysuru is emerging as a hub for precision engineering and IT. The conclave aimed to harness regional capabilities, integrate Karnataka’s MSME ecosystem into the national defense agenda, and drive indigenization and export promotion from the region.
Collaborative Power: Key Stakeholders Driving India’s Defence Self-Reliance
The success of India’s ‘Atmanirbhar Defence’ initiative is driven by collaborative efforts of governmental bodies, industry associations, and public sector undertakings.
Department of Defence Production (DDP):
The DDP, under the MoD, is the primary body for fostering self-reliance, architecting policies and programs for indigenous production and MSME integration. Its outreach programs, like the Mysuru conclave, disseminate information, address concerns, and facilitate interaction. The DDP aims to transform India into a global design and manufacturing hub for defense components, relying on MSME participation.
Federation of Indian Chambers of Commerce & Industry (FICCI):
FICCI bridges the gap between the government (DDP, Indian Army) and the private sector. Through seminars and conclaves, it aligns industry capabilities with defense requirements. Its association with events like the Mysuru Conclave ensures MSME voices are heard and policy frameworks are responsive. FICCI promotes indigenous manufacturing and a symbiotic relationship between industry and defense.
Hindustan Aeronautics Limited (HAL):
As a major DPSU, HAL is at the forefront of India’s aerospace and defense manufacturing. It actively collaborates with the private sector to unlock new dimensions in manufacturing and R&D through public-private partnerships. HAL’s support for initiatives like the Defence MSME Conclaves demonstrates its commitment to fostering a strong vendor base, modernizing the MSME ecosystem, and creating globally competitive aerospace suppliers.
Charting the Course: Opportunities and Challenges for Defence MSMEs
Challenges for MSMEs in the defense sector include limited access to capital, payment delays, gaps in technical expertise, stringent regulatory compliance, and complex acquisition procedures. High investment for advanced testing infrastructure and adherence to quality standards also pose entry barriers.
However, opportunities for Indian Defence and Aerospace MSMEs are significant. The surging demand for indigenous defense solutions creates a vast market. Approximately 70% of the capital acquisition budget is now reserved for the domestic industry, guaranteeing MSMEs a share in India’s defense modernization. Sustained demand for modernizing the armed forces offers strong growth prospects. India’s increasing defense exports also provide avenues for MSMEs to expand their global footprint.
To realize this potential, continuous efforts are needed in enhancing access to tailored funding, streamlining procurement, implementing skill development programs, and fostering stronger collaborations. Awareness campaigns and platforms like the Mysuru conclave remain vital for keeping MSMEs informed and engaged.
Conclusion
India’s vision of a future-ready defense and aerospace ecosystem, anchored in self-reliance and aspiring to global leadership, is rapidly taking shape. Indian Defence and Aerospace MSMEs are the dynamic engines of this transformation, injecting innovation, agility, and national purpose. The Defence MSME Conclaves 2025–26 in Mysuru underscored the government’s commitment to nurturing these entities.
Through policies like DAP 2020, iDEX, and TDF, complemented by infrastructure development like Defence Industrial Corridors, the ecosystem is evolving to empower MSMEs. The collaborative efforts of the DDP, FICCI, and HAL are instrumental in cultivating an environment where MSMEs can thrive, contribute to indigenous manufacturing, and boost India’s defense export footprint. As India progresses towards becoming a major global defense power, the contributions of its MSMEs will remain foundational to achieving true ‘Atmanirbhar Bharat’. The future of Indian defense and aerospace is inextricably linked to the prosperity, ingenuity, and innovation of its micro, small, and medium enterprises.
About the Author
