India’s aerospace & defence industry stands at a pivotal moment, with the potential to unlock immense value through a more holistic approach to indigenisation. While significant strides have been made in platform development and MSME participation, the next big leap lies in fostering a strong ecosystem of Tier 1 suppliers. Globally, these suppliers serve as the backbone for innovation, developing cutting-edge systems and sub-systems that enable OEMs to develop & integrate state-of-the-art platforms.

By strategically focusing on high-value capabilities such as propulsion, electronics, avionics, and structures, India can create a thriving defence manufacturing ecosystem that not only strengthens self-reliance but also attracts Indian private sector participation at scale. This presents an exciting opportunity to bridge existing gaps while ensuring that India’s defence industry is not just self-sufficient but also globally competitive.

India’s journey towards technological self-reliance and global leadership in Aerospace & Defence will have to be fuelled by the development of a robust ecosystem for indigenous systems and sub-systems. A key driver of this transformation lies in harnessing the combined strengths of both the Defence Public Sector Enterprises and Indian Private sector. By fostering collaborative models, India can unlock new opportunities for innovation, agility, and scale. These partnerships enable private enterprises to contribute cutting-edge solutions while leveraging the strategic resources and institutional support of government initiatives. Such a synergistic approach not only accelerates indigenisation but also helps overcome structural and financial barriers, paving the way for a globally competitive and self-sufficient defence industry.

Some of the key focus areas are as follows:-

1. Build Tier 1, own the future: India stands at the cusp of a transformative leap in defence and aerospace indigenisation. While Indian OEMs and Tier 2 suppliers have made significant strides, a thriving Tier 1 ecosystem is the missing link to achieving true self-reliance. By fostering co-development partnerships between DPSUs and Indian private sector companies for upcoming indigenous platforms like AMCA and IMRH, the nation can build a resilient, high-value supply chain. Strengthening this critical layer will not only reduce foreign dependency but also position India as a global leader in advanced defence technology. The time is now to propel innovation, collaboration, and indigenous excellence.
2. From products to capabilities - building next-gen systems: India must shift its focus from product development to capability development to achieve long-term self-reliance and global leadership. By prioritising collaboration, investing in research and development (R&D), and fostering a robust indigenous ecosystem, the nation can unlock unprecedented opportunities for innovation and technological growth. Strengthening strategic partnerships between DPSUs, private industry, research labs, and academia will accelerate advancements and ensure sustained progress. Rather than focusing solely on manufacturing individual products, India needs to build core technological competencies that drive continuous innovation in critical sectors. The Indian Space Research Organisation’s successful model—where private firms such as Godrej & Boyce and MTAR manufacture complex subsystems like the Vikas Engine—demonstrates a proven blueprint that can be adapted to aerospace and defence. By emphasising capability development, India can work towards establishing a self-sufficient and future-ready ecosystem, positioning itself as a global technology leader.
3. Crafting the right framework - driving India's defence revolution: To drive self-reliance and global competitiveness, India must establish robust models for scaling the domestic manufacturing and deployment of systems through collaborative efforts between DPSUs and Indian private sector. A strategic approach—centred on policy incentives, technology partnerships, and advanced manufacturing infrastructure—will empower Indian companies to enhance production capacity, improve quality, and integrate into global supply chains. Targeted funding mechanisms, such as government grants for R&D, viability gap funding, and assured orders for domestically developed systems, will provide the financial confidence needed for large-scale investments and innovation. By fostering deeper collaboration between DPSUs, private industry, and startups, India can create a strong Tier 1 ecosystem that not only strengthens supply chains but also ensures the widespread adoption of indigenously developed systems in defence and critical sectors. The time is now to accelerate the development, manufacturing, and deployment of high-value Tier 1 solutions, reinforcing India's position as a global leader in advanced technology and self-reliant innovation.

India is poised to revolutionise its defence manufacturing sector. By strengthening the Tier 1 ecosystem, investing in R&D, and ensuring policy-backed financial support, the nation can accelerate self-reliance and global competitiveness. Key priorities include:

1. Building Tier 1 strength – Developing critical systems through DPSU-private sector collaboration.
2. Driving innovation – Investing in R&D and leveraging research institutions for next-gen capabilities.
3. Ensuring financial backing – Providing viability gap funding, assured orders, and policy incentives.

With strategic action, India can establish itself as a global leader in advanced defence technology—the time to act is now.

This article is authored by Mario Gonsalves, India leader - public services and Vinod Narasimhamurthy, partner, BCG.