The Strategic Logic of India’s Private-Sector Missile Pivot
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In late August, Defence Minister Rajnath Singh approved the transfer of technologies developed by the Defence Research and Development Organisation (DRDO) for conventional missile systems to qualified Indian defence companies for domestic production.[1] The decision allows private firms to bid for technology transfer, secure designation as Development-cum-Production Partners (DcPPs), and assume prime systems-integration responsibility. It thus marks a departure from the long-standing model under which DRDO-designed missiles were largely transferred to nominated public-sector production agencies, overwhelmingly Bharat Dynamics Limited (BDL).
The change is significant not only because private companies are being brought into missile production, but also because it addresses a fundamental weakness in India’s defence-industrial architecture: the gap between developing sophisticated weapons and producing them at scale. Strategic deterrence ultimately depends not only on what a country can design, but also on what it can manufacture, replenish and sustain during a prolonged conflict. By introducing competition into a sector historically dominated by public-sector production, India is seeking to deepen the industrial foundations of its military power.
From stockpiles to surge capacity
The most immediate rationale for the move is the changing nature of warfare. Conflicts in Ukraine and West Asia, along with India’s experience during Operation Sindoor in May last year, have shown how quickly precision munitions and air-defence interceptors can be consumed in high-intensity operations. The clear lesson has been that a military’s wartime effectiveness depends not merely on the weapons available at the outset of a conflict, but also on its ability to replenish them.[2]
The experience following Operation Sindoor brought these pressures into sharper focus. The Ministry of Defence invoked Emergency Procurement Powers and allocated ₹9,100 crore under Emergency Powers Revenue 2025, while a further ₹31,000 crore was directed towards emergency revenue and capital acquisitions across the three services.[3] India also resorted to urgent foreign procurement of systems including Excalibur artillery shells and Javelin anti-tank missiles.3 During the conflict, limited stocks of precision standoff and beyond-visual-range weapons reportedly constrained operational choices.
This highlights the vulnerability inherent in relying on a narrow production base. India’s own ammunition indigenisation roadmap shows that although 159 of 175 scaled in-service ammunition variants have been indigenised, 110 remain single-sourced.[4] A similar concentration in missile production creates a potential single point of failure—whether because of production bottlenecks, supply-chain disruptions or physical damage to manufacturing infrastructure.
The new Development-cum-Production Partner model is designed to address precisely this problem. The Ministry of Defence plans to have at least two parallel production partners for each missile system, thereby creating redundancy and greater capacity to scale production.[5] Multiple production lines not only increase output in peacetime; they also provide the industrial depth required to sustain operations when demand suddenly rises.
This is particularly important in India’s strategic environment. China’s People’s Liberation Army Rocket Force fields a large inventory of conventional and nuclear missile systems, while Pakistan has established an Army Rocket Force Command following Operation Sindoor.[6], [7] India’s efforts to develop an integrated rocket force will ultimately depend not only on acquiring sophisticated systems, but also on having sufficient industrial capacity to sustain them.
A decade of opening up
The August decision should nevertheless be seen as part of a longer transformation rather than an abrupt policy reversal. India formally opened defence manufacturing to domestic private participation in 2001, but private companies remained concentrated in lower tiers of the supply chain for years, supplying components, castings and other inputs rather than serving as prime manufacturers.
That began to change through a series of incremental reforms. In 2015, Larsen & Toubro became the first private firm licensed to manufacture a complete DRDO-designed system, the Lakshya pilotless target aircraft.[8] The Strategic Partnership model introduced in 2017 subsequently created a formal role for private companies as prime integrators for major defence platforms, although missiles remained outside its ambit.[9]
DRDO’s introduction of formal DcPP guidelines in 2019 further institutionalised private participation, while the government’s successive Positive Indigenisation Lists sought to create a more predictable domestic market for Indian manufacturers.10,11 The corporatisation of the Ordnance Factory Board into seven defence public-sector undertakings in 2021 was another indication that the government was willing to restructure even the traditional public-sector core of defence manufacturing.[12]
The economics of private participation have also gradually improved. In May 2026, the Ministry of Defence abolished the earlier 20 per cent technology-transfer fee for DcPPs, Development Partners and Production Agencies.[13] In June, DRDO distributed 10–12 tactical missile development projects among BDL, Bharat Electronics Limited and four private companies—Adani Defence, Bharat Forge, ICOMM Tele and Solar Defence—based on assessed capabilities.
The August decision broadens this trajectory across the conventional missile portfolio. It also aligns with the recommendations of the K. Vijay Raghavan committee on defence R&D reform, which envisaged DRDO focusing more heavily on research and technology development while industry assumes greater responsibility for prototyping and production.[1]4
The underlying logic is therefore larger than privatisation. It is an attempt to separate the functions of technological development and industrial production more effectively, while bringing a wider set of companies into the latter.
The private-sector advantage—and its limits
Private-sector participation can potentially address several weaknesses in India’s existing model. Private firms can mobilise capital and adjust their workforce more flexibly than government-owned entities. They may also have stronger incentives to invest in manufacturing efficiency and upstream capabilities.
Adani Defence’s ₹2,500-crore facility in Madhya Pradesh’s Shivpuri illustrates the potential direction of this shift.15 By combining systems integration with the production of composite propellants and TNT, the facility seeks to address multiple layers of the missile manufacturing chain rather than simply assembling components.
But multiplying prime manufacturers will not automatically create a resilient defence-industrial base.
The first challenge is the nature of technology transfer. Under DRDO’s Licensing Agreement for Transfer of Technology, the industry receives manufacturing know-how but not necessarily the underlying design “know-why.” DRDO retains ownership of intellectual property, while software is supplied in executable binary form rather than in source code.[16] This can leave private companies as highly capable licensed manufacturers without giving them full control over design and future upgrades.
That sits uneasily alongside the draft Defence Acquisition Procedure 2026, which promotes an “Owned by India” standard under which private prime contractors would own critical design data, source code and upgrade authority.[17] If India wants private firms to become genuine long-term defence technology companies rather than advanced assemblers, this tension will eventually need to be resolved.
Testing and certification pose another constraint. Missile production requires extensive and expensive testing, and much of the relevant infrastructure remains concentrated within the state. DRDO conducted more than 4,000 tests for industry in 2025; DRDO alone operates 609 of the country’s 1,184 defence-testing systems, spread across 84 locations nationwide.[18] As more companies enter production, testing capacity itself could become a bottleneck.
Procurement is equally important. Private firms will be reluctant to invest heavily in specialised, non-redeployable production lines without confidence that orders will follow. India’s defence acquisition system has historically been slow, and the iDEX experience illustrates the difficulty of translating successful development into sustained procurement. As of February 2026, iDEX had 676 start-ups and MSMEs, 548 development contracts and 566 challenges, but only 58 prototypes had been cleared for procurement and just 45 procurement contracts had been signed.[19] This points to a significant gap between development and procurement. The draft DAP 2026 provisions on long-term bulk acquisitions and guaranteed post-trial orders could help address this, but their effectiveness will depend on implementation.[20]
There is also a danger of confusing diversification of production with diversification of supply. If several Indian companies depend on the same foreign suppliers for seekers, infrared sensors, gyroscopes or specialised alloys, multiple assembly lines offer only limited resilience. The government’s recent efforts to indigenise missile subsystems and raw materials therefore need to proceed alongside the expansion of prime manufacturing.
Lessons from abroad
These structural bottlenecks are not unique to India. They reflect a broader challenge faced by major military powers seeking to translate advanced defence technologies into sustained production at scale. Countries that have successfully expanded missile manufacturing have generally done so not by withdrawing the state from defence production, but by recalibrating the division of responsibilities between government and industry. Three cases are particularly instructive.
Israel: Israel’s experience illustrates the importance of giving defence firms greater commercial flexibility while retaining strong state oversight. Although private companies had supplied missile subsystems since the late 1960s, bureaucratic constraints initially limited the development of a broader private missile-manufacturing ecosystem. A significant change came in 2002, when Rafael—Israel’s state-owned defence technology and weapons systems company—was converted from a Ministry of Defence agency into a commercially chartered, limited-liability corporation.[21] This gave Rafael greater flexibility to pursue industrial partnerships, including with Israel Aerospace Industries and foreign firms. In 2017, for instance, Rafael partnered with India’s Kalyani Group to establish the KRAS facility in Hyderabad for manufacturing sub-assemblies for Spike anti-tank guided missiles and Barak-8 systems.[22], [23]
United States: The US model evolved around a different institutional division of labour. During the early Cold War, the Pentagon increasingly recognised the advantages of leveraging commercial expertise in areas such as rocketry and electronics. Over time, the government retained responsibility for defining military requirements, funding research and setting standards, while private defence contractors assumed much of the responsibility for systems integration and serial production. Today, companies such as Lockheed Martin and RTX manufacture major missile systems including the Patriot PAC-3 interceptor, Tomahawk cruise missile and AMRAAM air-to-air missile.24,25 The model demonstrates how substantial private-sector manufacturing capacity can coexist with strong government control over strategic requirements and technology.
South Korea: South Korea offers perhaps the closest parallel to India given its persistent security pressures and the central role of the state in building its defence-industrial base. Beginning in the 1970s, the government increasingly brought private conglomerates into defence manufacturing, including through the creation of Goldstar Precision, now LIG Nex1.26 Over subsequent decades, the state’s Agency for Defence Development (ADD) increasingly concentrated on research, design and testing, while companies such as LIG Nex1 and Hanwha Aerospace assumed a larger role in serial production.
The common lesson from these experiences is not that the state should withdraw from defence manufacturing. Rather, successful defence-industrial ecosystems have generally emerged when governments retain responsibility for strategic direction, technology development, regulation and oversight, while allowing industry to take greater responsibility for production, investment and scaling. For India, the challenge is therefore not simply to bring private companies into missile manufacturing, but to establish an institutional division of labour in which public and private capabilities reinforce rather than duplicate one another.
From public monopoly to competitive ecosystem
The entry of private companies should not be construed as a retreat by the public sector. BDL remains India’s most experienced missile manufacturer, with established infrastructure, expertise and supplier networks. Indeed, public-sector companies will remain central to the defence-industrial ecosystem.
The purpose of the reform is instead to remove their automatic entitlement to produce DRDO-developed missiles. In doing so, it introduces contestability into a sector where administrative allocation has historically been more important than competition.
That contestability could improve price discovery, delivery timelines and production efficiency. It could also encourage public and private companies to develop new forms of partnership and to specialise in different parts of increasingly complex weapons systems.
The export market will be important to sustaining this ecosystem. India’s defence exports reached ₹38,424 crore in FY2025–26, with private companies accounting for 45.16 per cent.[27] In fact, India’s flagship defence exports, including Brahmos, Akash and Pinaka to the Philippines and Armenia, rely heavily on private industry to build critical subsystems, launch platforms, and precision electronics. Yet, their final assembly has been monopolised by PSUs.
Thus, export demand for privately manufactured missiles can provide manufacturers with production continuity beyond periodic domestic procurement cycles. However, missile exports will remain subject to India’s export-control regime and international commitments, limiting their usefulness as an unrestricted source of demand.
The immediate test will come with competitive procurement for systems such as Astra Mk-2 and Pralay. If competition results in multiple capable producers, the reform could substantially deepen India’s missile-industrial capacity. If the process merely shifts production from one public-sector incumbent to a handful of large private conglomerates, India could end up replacing a public monopoly with a private oligopoly. However, the growing maturity of India’s private aerospace and defence sector provides a foundation for a more competitive and diversified missile-manufacturing ecosystem.
Companies such as Larsen & Toubro (L&T), Tata Advanced Systems (TASL), Bharat Forge (Kalyani Group), Premier Explosives, Solar Industries, and Data Patterns already supply major sub-assemblies, solid rocket propellants, radar guidance systems, and launch canisters for platforms including Pinaka, BrahMos, and Akash.
The policy’s real promise therefore lies not simply in allowing private companies to make missiles. It lies in creating a defence-industrial ecosystem with enough competing capacity, technological depth and supply-chain resilience to sustain production under pressure.
For India, the strategic value of this reform will ultimately be measured on the factory floor. Deterrence requires sophisticated weapons, but it also requires the industrial capacity to keep producing them when they are being used. By opening conventional missile production to qualified private firms, New Delhi has taken an important step towards building that capacity. The harder task now is to ensure that competition, procurement reform, indigenous supply chains and technological ownership develop alongside it.
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End Notes
1 Press Information Bureau. “Raksha Mantri Approves Transfer of Technology of DRDO-Developed Missile Systems to Indian Defence Industry to Bolster Indigenous Manufacturing.” Ministry of Defence, August 25, 2026. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2303014®=48&lang=2
2 Reuters. “Army Awards Lockheed Martin $5.86 Billion, Largest-Ever PAC-3 Patriot Missile Deal.” Reuters, July 29, 2026. https://www.reuters.com/business/aerospace-defense/army-awards-lockheed-martin-586-billion-largest-ever-pac-3-patriot-missile-deal-2026-07-29/
3 Press Information Bureau. “Year End Review – 2025: Ministry of Defence.” Ministry of Defence, December 31, 2025. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2210154®=48&lang=2
4 “Indian Army Indigenises 91% of Ammunition Variants, Cuts Import Dependence.” The Hindu BusinessLine. https://www.thehindubusinessline.com/news/indian-army-indigenises-91-of-ammunition-variants-cuts-import-dependence/article70436845.ece
5 “DRDO Conventional Missiles: Private Sector to Get Production Technologies, Says Rajnath Singh.” Business Standard, August 25, 2026. https://www.business-standard.com/external-affairs-defence-security/news/drdo-conventional-missiles-private-sector-production-rajnath-singh-126082500666_1.html
6 Center for Strategic and International Studies. “People’s Liberation Army Rocket Force (PLARF) Organization.” Air University, January 5, 2022. https://www.airuniversity.af.edu/Portals/10/CASI/documents/Research/PLARF/2022-01-05%20PLARF%20Organization%20ExecSum.pdf
7 “Pakistan’s New Rocket Force Command: 5 Big Points Explained.” India Today, August 16, 2025. https://www.indiatoday.in/world/story/pakistan-new-rocket-force-command-arfc-chinese-people-liberation-army-india-operation-sindoor-5-big-points-explained-2771310-2025-08-16
8 “L&T to Make Lakshya for India’s Military, Gets Technology from DRDO.” Business Standard, August 7, 2015. https://www.business-standard.com/article/current-affairs/l-tto-make-lakshya-for-indias-military-gets-technology-from-drdo-115080700938_1.html
9 Press Information Bureau. “Strategic Partnership Model in Defence Acquisition.” Ministry of Defence, March 12, 2018. https://www.pib.gov.in/newsite/PrintRelease.aspx?relid=177295®=48&lang=2
10 Press Information Bureau. “Research and Development in Defence Manufacturing.” Ministry of Defence. https://www.pib.gov.in/PressReleasePage.aspx?PRID=1848676
11 Press Information Bureau. “Aatmanirbharta in Defence.” Ministry of Defence. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2033571
12 Press Information Bureau. “Corporatization of Ordnance Factories.” Ministry of Defence, July 26, 2021. https://www.pib.gov.in/PressReleasePage.aspx?PRID=1739060®=48&lang=2
13 Press Information Bureau. “Research and Development in Manufacturing Sector.” Ministry of Defence. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2196856
14 Katoch, Lt. General P. C. “Whither DRDO Restructuring?” SP’s Land Forces. https://www.spslandforces.com/experts-speak/?id=1211&h=Whither-DRDO-Restructuring
15 Adani Defence & Aerospace. “Adani Defence and Aerospace to Invest ₹2,500 Crore in South Asia’s Largest Private Sector [Defence Manufacturing Facility].” Adani Group. https://www.adani.com/newsroom/media-releases/adani-defence-and-aerospace-to-invest-2500-crore-in-south-asias-largest-private-sector
16 Press Information Bureau. “DRDO Hands over Licensing Agreements for Transfer of Technology to Industry.” Ministry of Defence. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2183976®=48&lang=2
17 Pai, T. V. Mohandas, and Pranav Pai. “India’s Defence Procurement Is Creating Sovereign Capabilities. Every Government Buyer Must Emulate It.” Moneycontrol. https://www.moneycontrol.com/news/opinion/india-s-defence-procurement-is-creating-sovereign-capabilities-every-government-buyer-must-emulate-it-14019723.html
18 “What Is DRDO?” Manorama Yearbook, January 2, 2026. https://www.manoramayearbook.in/current-affairs/india/2026/01/02/what-is-drdo.html
19 “676 Startups, 548 Contracts: How iDEX Is Scaling India’s Defence-Tech Ambitions.” The Financial Express. https://www.financialexpress.com/business/defence-676-startups-548-contracts-how-idex-is-scaling-indias-defence-tech-ambitions-4314686/
20 Refer point 17.
21 Rafael Advanced Defense Systems. “Rafael Corporate Profile.” Rafael Advanced Defense Systems, February 2025. https://www.rafael.co.il/wp-content/uploads/2025/02/Refael_ENGLISH100225MINA_All_compressed.pdf
22 Raghuvanshi, Vivek. “India’s Kalyani Group, Israel’s Rafael Open Missile Manufacturing Facility.” Defense News, August 3, 2017. https://www.defensenews.com/smr/space-missile-defense/2017/08/03/indias-kalyani-group-israels-rafael-open-missile-manufacturing-facility/
23 Kalyani Rafael Advanced Systems. “System Integration & Testing.” https://www.krasindia.com/system-integration-testing.php
24 Refer point 2.
25 “RTX to Ramp Up Production of Five Weapons in New Deal with Pentagon.” Breaking Defense, February 2026. https://breakingdefense.com/2026/02/rtx-to-ramp-up-production-of-five-weapons-in-new-deal-with-pentagon/
26 “Hyundai Rotem’s Earnings, Shares to Rise; Defense Deals in the Offing.” KED Global, September 12, 2024. https://www.kedglobal.com/aerospace-defense/newsView/ked202409120005
27 Press Information Bureau. “Defence Exports Touch Record High.” Ministry of Defence, April 2, 2026. https://www.pib.gov.in/PressReleaseDetail.aspx?PRID=2248124®=3&lang=1
Kamal Madishetty is an Assistant Professor at the Rashtram School of Public Leadership, Rishihood University, where he specialises in international relations and technology policy, and a Visiting Fellow at India Foundation. He was formerly a Senior Researcher at the China Research Programme at the Institute of Peace and Conflict Studies, New Delhi. Kamal holds a B.Tech from IIT Guwahati and a Master’s degree from the Jindal School of International Affairs. He has also previously worked with The Economist Intelligence Unit and the Institute for Defence Studies and Analyses.
Bhavya Jha is a policy and regulatory affairs professional working at the intersection of defence, strategic, and industrial policy. She currently works in the defence manufacturing sector, with a focus on government engagement and policy affairs. She previously worked with the Security and Strategic Affairs Division at NITI Aayog and in political-economic consulting. Bhavya holds a B.A. LLB (Hons) from the National Law Institute University, Bhopal.
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