India's Defence Exports Reach Record High, But Can They Meet FY29 Target?

India’s defence exports touched a record Rs 38,424 crore in FY26. That is up 62.66% over the previous year, according to a report by CareEdge Ratings. Yet the government’s own target for FY29 is Rs 50,000 crore. That implies exports will grow at roughly 9% a year from here. It is less than half the near-20% pace at which shipments have expanded since FY19. Can listed public-sector undertakings, which account for the bulk of export revenue, keep pace with a market that has been growing much faster than the official projection assumes? Defence exports have climbed steadily over the past seven years. They rose from Rs 10,700 crore in FY19 to Rs 23,600 crore in FY25 and then to Rs 38,424 crore in FY26. That is a compound annual growth rate of about 20% over the period, per the CareEdge data. Both defence public sector undertakings (DPSUs) and private companies contributed to the FY26 jump. DPSUs accounted for 54.84% of exports and private players for the remaining 45.16%. The number of defence exporters also widened, rising to 145 in FY26 from 128 the year before. As per the government’s stated targets, exports are projected at Rs 40,000 crore in FY27 and Rs 50,000 crore by FY29. That works out to a CAGR of about 9% for the FY26-FY29 stretch. According to the report, the export momentum is driven by policy support such as ease-of-doing-business reforms, streamlined export procedures, and a broader push toward indigenous manufacturing. India now exports defence equipment to more than 80 countries. Myanmar, the Philippines and Armenia were the top three destinations during 2021-25. Looking further out, the report noted that India aims to scale exports to Rs 2.8 lakh crore by 2047 under the Viksit Bharat vision. “India’s defence sector is witnessing a structural transformation driven by rising indigenisation, higher capital outlay, and increasing private sector participation. With defence production targeted to reach Rs 3 lakh crore by FY29 and a strong focus on domestic procurement, the sector is expected to maintain healthy growth momentum over the medium term. Improving execution capabilities, expanding manufacturing capacity, and sustained policy support are likely to strengthen India’s position in the global defence ecosystem,” Pritesh Rathi, Associate Director at CareEdge Ratings, noted. According to CareEdge, exports will grow from Rs 1.78 lakh crore in FY26 to Rs 3 lakh crore by FY29, a CAGR of about 19%. Profitability before interest, lease, depreciation and tax (PBILDT) margins are expected to hold between 20 and 22%. State-run entities continue to dominate that base. DPSUs, other PSUs and joint ventures together made up roughly 72%, 4% and the remainder, respectively, of production in FY26. Private companies have been gaining ground, though. Their share rose to 24% in FY26 from 20% in FY21. Furthermore, the report noted that old DPSUs, new DPSUs and other PSUs/JVs together made up 85-90% of aggregate defence production in FY26. Their combined total operating income rose from Rs 79,361 crore in FY23 to an estimated Rs 1,16,565 crore in FY26. It is projected to reach Rs 1,34,421 crore in FY27, a CAGR of 14.1%. PBILDT margins have held near 22% since FY24. Private sector production grew faster still. It expanded at a CAGR of about 19.4% between FY21 and FY26, against roughly 16% for the sector as a whole. Companies driving this growth include Tata Group , Larsen & Toubro , Adani Group , Mahindra Defence Systems and Kalyani Group . The Union Budget for FY27 allocated Rs 7.85 lakh crore to the Ministry of Defence. That is a roughly 15% increase over FY26 and close to 2% of GDP. Of the Rs 2.19 lakh crore set aside for modernisation and capability enhancement, Rs 1.85 lakh crore is earmarked for capital acquisition in FY27. About 75% of that, or Rs 1.39 lakh crore, is meant for domestic procurement, the report noted. That domestic push is also showing up on the import side. Russia’s share of India’s arms imports has fallen to about 40% during 2021-25. It stood at roughly 70% a decade earlier. New Delhi has diversified toward France and Israel in the meantime. India remained the world’s second-largest arms importer during 2021-25, accounting for about 8.2% of global imports. That is down from 9.3% in 2016-20 and 14% in 2011-15. The report noted that continued procurement of fighter aircraft, submarines and other high-technology systems means imports will likely remain necessary even as indigenisation deepens. “India’s defence exports have also scaled new highs, reaching Rs 38,424 crore in FY26, supported by growing global acceptance of indigenous defence products and increasing integration into international supply chains. Backed by favourable policy initiatives, rising geopolitical uncertainties, and continued investments towards technology and R&D, the sector is well positioned to enhance export competitiveness and support India’s long-term self-reliance objectives,” Pulkit Agarwal, Director at CareEdge Ratings, said. Whether that competitiveness is enough to beat the FY29 target is still an open question.