India’s $33 billion defense production ambition is on track. Here are the potential gainers
Despite the recent crash of an India-made Tejas fighter jet at an airshow in Dubai, investors are bullish on New Delhi’s defense ambitions as the country seeks to double its military production to 3 trillion rupees (about $33 billion) by 2029 . It also aims to raise its defense exports to 500 billion rupees by the same year, among other goals . “Given the geopolitical relations India shares with its neighbors and intent to modernize its armed forces, India’s defense budget has remained elevated,” Macquarie Research said in a report on Nov 20. India is the fifth-largest military spender globally, according to data from the Stockholm International Peace Research Institute. The April report showed that the country spent $86.1 billion on defense in 2024. Top picks India’s private sector companies held a 64% share of the country’s defense exports in fiscal 2025. India supplies equipment to over 80 countries, including the U.S., France and Armenia. Macquarie Research highlighted Indian engineering major Larsen & Toubro (L & T) and state-owned Bharat Electronics as its top picks. The brokerage is overweight on L & T, with a target price of 4,350 rupees, about 8.3% above its Monday closing price. L & T earns only 3% of its total revenues from defense, but it is “among the most trusted private enterprises in India to execute defense projects”. The company has partnerships with the research and development arm of the Indian Defense Ministry and the armed forces to develop and manufacture defense products, systems and platforms. In October, the firm signed a pact with U.S.-headquartered General Atomics Aeronautical Systems to manufacture medium-altitude, long-endurance unmanned aerial vehicles for the Indian armed forces. Macquarie is also overweight on state-owned Bharat Electronics , India’s largest defense electronics manufacturer. The brokerage has a target price of 480 rupees, which is 16.8% above its Monday close. “It is a key Indian defense player in the new age electronic warfare and missile ecosystem with strong and diversified order backlog (US $8.5bn) across platforms including export book,” the Macquarie analysts said. The report also noted that Bharat Electronics has offices in New York, Muscat, Colombo, and several Southeast Asian markets to support export growth. There is a global shift in defense spending “from the short-term war-driven surge in 2022-25 to a prolonged rearmament phase through 2030, given persistent multipolar tensions with countries across the world,” Macquarie said. Despite the cutting-edge technology of Western defense ecosystems, they face supply constraints in shipbuilding, munitions and electronics, making Asia’s manufacturing depth and cost-efficient scalability “indispensable.” Rising threats, rising spending In April, a terror attack by Islamist militants in the Indian-controlled region of Kashmir killed 26 civilians. New Delhi responded with airstrikes inside Pakistan, resulting in a four-day conflict that raised fears of a broader escalation rooted in decades of hostility between the two countries. After a ceasefire on May 10, Prime Minister Narendra Modi said that India would answer future attacks forcefully and called the operation against Pakistan proof of the reliability of domestically made weapons . “If there is a terrorist attack on India, a fitting reply will be given,” he said , adding that India “will not differentiate between the government sponsoring terrorism and the masterminds of terrorism”. “During this operation, the credibility of our Made in India weapons were also proven,” the prime minister said, adding that “the time has come for Made in India defense equipment”. For fiscal year 2026, New Delhi has set a defense budget of about 6.8 trillion rupees to strengthen its military capabilities while reducing its reliance on foreign suppliers. India produced 1.54 trillion rupees in defense goods in fiscal 2025, with indigenous output at a record of about 1.27 trillion rupees, according to a release by the Indian government. Of this, state-owned enterprises accounted for 77% of total production, while the private sector contributed 23%, growing from 21% in the previous fiscal year.
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