Rupal Kalebere and Sujeet Samaddar
Research & Development (R&D) & Innovation
The Indian Defence Budget 2025 has allocated ₹26,816 crore up from Rs 23,855.61 crore in FY 2024-25 to the Department of Research & Development (DRDO), marking a 12.41% increase over the previous year. Out of this, a major share of Rs 14,923.82 crore has been allocated for capital expenditure to fund the R&D projects against Rs 13208.00 in FY 2024-25. This will financially strengthen the DRDO in developing new technologies with special focus on fundamental research and hand-holding of the private parties through Development-cum Production Partner model. The increased allocation under Capital Head of DRDO will further provide adequate financial resources in funding the projects to be taken up in collaboration with private parties through flagship scheme of DRDO i.e. Technology Development Fund and will assist the development of Deep Technology in the defence sector. Towards revenue the allocation has increased from Rs 11030.01 in FY 2024-25 to Rs 11893.00 in BE 2025-26.
This increase in funding support for the DRDO, reflects India’s commitment to strengthening indigenous defence capabilities and advancing cutting-edge military technologies. However, while this increase is a positive step, the budget has not provided a separate allocation for enhancing private sector participation in R&D.
Moreover, critical initiatives such as iDEX (Innovations for Defence Excellence) and ADITI (Advanced Defence Innovation & Technology Initiative) have faced some funding cuts, despite their crucial role in fostering defense startups and indigenous technological advancements. But, assistance for prototype development has seen a remarkable increase from only Rs 1797.8 crores in FY 2024-25 to Rs 2037.16 crores in BE 2025-26.
Strengthening Indigenous Defence R&D
The ₹26,816 crore allocation for DRDO is aimed at developing next-generation defence platforms, reducing India’s reliance on foreign technology imports, and bolstering self-sufficiency in critical areas such as:
- Missile and Aerospace Technologies – Enhancing programs like Agni, BrahMos, and Astra missiles.
- Electronic Warfare and Cybersecurity – Strengthening digital defense against modern threats.
- AI and Autonomous Systems – Expanding capabilities in unmanned aerial and underwater vehicles.
- Hypersonic and Directed Energy Weapons – Investing in futuristic technologies for combat superiority.
- The budget also highlights the focus on emerging technologies such as Artificial Intelligence (AI), Machine Learning, Robotics, and Cyber and Space technologies, which are crucial to future-proofing India’s defence capabilities.
A PIB release stated “For making the Armed Forces self-reliant in defence technology and encouraging innovation, it is imperative to engage the private players and strengthen the start-up ecosystem in the country for technological development and innovation in the defence sector. For this purpose, Rs 449.62 crore has been allocated to iDEX scheme, including its sub scheme Acing Development of Innovative Technologies with iDEX (ADITI) to be utilised for funding the projects to be taken up under this scheme. Allocation in this head shows a jump of almost three times in two years.”
While this funding increase is a step forward, India still lags behind major global defence players in R&D spending as a percentage of GDP. Countries like the U.S, China, and Russia allocate significantly higher proportions of their defense budgets to innovation and advanced military research, ensuring a steady technological edge over adversaries. India must increase its defence R&D budget, which currently stands at about 5% of total defence spending, compared to the U.S., which allocates 15% to about 10% over the next few years to support fundamental research in quantum computing, terahertz electronics, materials and underwater navigation systems in GNSS/GPS denied environment.
Challenges in Promoting Defence Startups and Innovation
Despite India’s efforts to promote indigenous defense R&D, initiatives like iDEX and ADITI, which aim to support startups and small enterprises in developing defense technology, need further augmentation. These programs play a crucial role in:
- Bringing private sector innovation into defense manufacturing.
- Developing cost-effective and technologically superior solutions.
- Enhancing collaboration between startups, academia, and established defense firms.
Funding support for these initiatives reflects India’s desire to nurture a robust defence technology ecosystem at the startups, MSME and entrepreneur level. Without sustained support, the country risks losing momentum in building a competitive private-sector-led defense R&D base and therefore continued support is reflected of India’s determination to develop inhouse solutions for the armed forces.
Limited Private Sector Involvement in R&D
One of the biggest gaps in India’s defense R&D landscape is the lack of substantial private sector investment. Unlike global defense giants such as Lockheed Martin, Boeing, and BAE Systems, where private firms drive military innovation, India’s defence sector remains heavily dependent on state-run organizations like DRDO. The absence of targeted incentives for private R&D investments limits the growth of:
- Advanced military technologies developed outside the public sector.
- Joint ventures with international firms for knowledge exchange.
- Faster commercialization of cutting-edge defense products.
A lighthouse project that has earned credit for rapid development is the Zorawar Light Tank Project Developed by the Combat Vehicles Research and Development Establishment (CVRDE) under DRDO, with L&T as the production partner in a short period of two years and will be fielded fo acceptance trials by the later half of 2025.
On a positive note, the Ministry of Defence has announced that 2025-26 will be the ‘Year of Reforms’ which will further
strengthen the resolve of the Government for modernisation of Armed Forces and is aimed for simplification in the Defence Procurement Procedure to ensure optimum utilisation of the allocated budget.
(To be continued)