India's defence technology sector is experiencing a significant transformation. With venture capitalists increasingly investing, a push for indigenous drones and UAVs, and supportive policies, defence tech is gaining traction.
In 2025 alone, defence tech startups raised nearly 90% of the total $78 million secured over the past decade, amounting to $68 million.
However, recent conflicts in the Middle East underscore the importance of AI and software-driven systems in defence. India currently lacks large defence AI firms comparable to those in the US, such as Palantir and Anduril.
This shift towards AI presents both challenges and opportunities for India, which has historically depended on imported defence technology.
Current Landscape and Challenges
While the Indian defence tech ecosystem is progressing, growth remains uneven. Amardeep Singh, founder of drone defence company Armory, emphasizes the need for self-reliance in light of shifting global alliances.
India's software capabilities are strong, yet manufacturing quality and scale remain critical hurdles. The defence budget has increased by 15.19% year-on-year to ₹7.85 lakh crore in FY27, which is seen as a positive step towards indigenisation.
Support for Startups
Initiatives like the Innovations for Defence Excellence (iDEX) scheme provide funding of up to ₹25 crore for startups. The Army Design Bureau and similar bodies now publish annual problem statements for startups to address, marking a significant improvement in procurement processes.
Despite these advancements, attracting talent remains a significant issue. Defence startups often struggle to offer competitive compensation compared to mainstream tech sectors.
Software-First Approach
India's defence stack is increasingly influenced by a software-first, AI-led approach, although hardware limitations still pose challenges. Many core electronics and intellectual property rely on foreign sources, highlighting the gap between perceived indigenisation and true self-reliance.
Armory's CEO envisions a future where software-defined hardware allows for upgrades post-delivery, ensuring systems can adapt to evolving threats.
Focus Areas
Key focus areas include:
- Computer vision and automated threat classification
- Logistics optimization in battlefield conditions
- Edge-deployed AI in secure environments
According to Preet Sandhu, founder of AVPL International, integrating AI into drones enhances their capabilities significantly beyond basic functions.
Indigenisation Nuances
While components like frames and batteries are increasingly manufactured in India, critical IP for electronic components often remains foreign. This situation complicates the narrative of self-reliance.
Experts like Manish Gupta highlight that while manufacturing may occur in India, the underlying technology often originates abroad, limiting true independence.
Investment Trends
Defence tech has become a focal point for venture capitalists, with investments flowing into startups specializing in drones, autonomous systems, and digital warfare. Evaluating opportunities in this space involves understanding the layers of system intelligence, as hardware value shifts towards software capabilities.
India's unique geography offers a competitive advantage, enabling the development of systems that meet stringent global standards.
In conclusion, while India's defence tech sector is on the rise, it must navigate challenges in manufacturing, talent acquisition, and true indigenisation to realize its full potential.
