The big moment for India’s defence industry

The India-UK trade deal could rewrite the rules of the game and give a much-needed boost to the private sector

The signing of the India-UK Comprehensive Economic and Trade Agreement (CETA), under the broader India-UK Vision 2035, is being celebrated as a milestone in bilateral trade, services and investment. For the Indian defence industry, the real story goes beyond tariff cuts or market access.

CETA could become the cornerstone of a modern, competitive and private-led defence industry, which is something that India has been trying to achieve for over two decades.

In a sector dominated by defence public sector undertakings (DPSUs) and a procurement culture that has often left private players on the sidelines, this agreement offers a fresh chance to rewrite the rules of the game. 

A big step in this direction is the commitment to a 10-year Defence Industrial Roadmap announced under the Vision 2035 framework.

One of the greatest challenges for private companies has been the absence of predictable demand. DPSUs, with government backing, have always had stable and sometimes over-packed pipelines, allowing them to invest in long-term R&D.

Private players, in contrast, have struggled to convince lenders and investors to support large, high-risk projects without visibility of future contracts. By locking in a decade-long plan monitored at a senior official level, the CETA signals stability and predictability, which can transform the investment climate for private defence manufacturing.

Equally significant is the explicit emphasis on technology co-development rather than simple technology transfer.

The text of the agreement signals regular dialogues to ease licensing and export controls, which have historically slowed or blocked the participation of Indian private firms in advanced weapon development.

The deal mentions collaboration on advanced programmes such as jet engine core technologies (JEACT), the Electric Propulsion Capability Partnership and even emerging areas like underwater systems and directed energy weapons.

Historically, co-development projects have gravitated towards DPSUs, leaving private firms as low-value subcontractors. The challenge now will be ensuring that these new technology partnerships do not remain the preserve of DPSUs but are opened up to private lead system integrators who can bring fresh innovation and efficiency to the table.

Perhaps the most underexplored element that the CETA and Vision 2035 lay out is the financial architecture.

India and the UK have committed to deepen capital market linkages, negotiate a Bilateral Investment Treaty (BIT) and expand British International Investment (BII) support. 

This opens a route for private defence firms to access British International Investment, UK Export Finance-backed credit and potentially even private equity.

For decades, private players have been treated as contractors rather than co-creators in defence procurement, often lacking the creditworthiness to invest in cutting-edge R&D.

If structured correctly, this could move the sector beyond outdated offset models and towards direct investment in private R&D and manufacturing capacity, particularly for SMEs in the defence sector.

Another promising area is regulatory cooperation and intellectual property (IP). One reason private firms have struggled to break into global markets is the slow and costly process of getting their products certified for international use.

The CETA framework could enable faster mutual recognition of testing and certification between India and the UK, which would allow Indian-made components to be integrated into global supply chains much more smoothly. Moreover, co-developed technologies need to have clear IP-sharing rules so that private companies can retain the right to export and scale them. 

Another crucial dimension of the Vision 2035 agreement is its focus on supply chain resilience in critical and emerging technologies. For India’s private defence sector, access to advanced materials, propulsion systems and semiconductors is vital to move up the value chain from assembly to original design.

These materials are also the building blocks of modern weapons and aerospace systems. The proposed UK-India Joint Industry Guild on Critical Minerals, for example, could give Indian firms the raw material security required to scale indigenous production of advanced platforms. 

The agreement also designates India as a regional hub for sustainment and logistics support for UK armed forces in the Indian Ocean Region. This creates a unique opening for private Indian shipyards, aviation maintenance firms and logistics providers to secure recurring contracts for maintenance, repair and overhaul (MRO), which is a sector that offers steady, service-based revenues and global exposure. 

Of course, opportunities always come with risks. Export control laws in the UK could still limit how far Indian firms can go in re-exporting technologies developed through these partnerships. There is also the possibility that British investments flow into short-term assembly projects rather than deep research collaborations.

To prevent this, the roadmap must include firm commitments on private sector participation, local R&D and co-ownership of intellectual property. Without these safeguards, the benefits of the CETA might once again end up concentrated in the public sector.

What makes this agreement truly significant is its timing. India is at a point where it wants to not only meet its own defence needs but also become a global supplier, in line with the “Make in India, Make for the World Initiative”.

For that to happen, the private sector must step up, and that requires predictable demand, access to advanced technology and reliable funding. The CETA provides all three of these elements in a way that few past agreements have done.

For too long, India has aspired to build a self-reliant and competitive defence industry, but policy intent and execution have rarely matched. The CETA with the UK may be the moment when that changes.

It is not just a trade deal; it is a strategic framework that, if used wisely, could help India’s private defence sector find its global footing.

(The author is a research analyst at the Chintan Research Foundation)