India Opens Defence Sector to Start-ups and MSMEs with New Funding and Testing Access

Indian Defence Minister Rajnath Singh urged domestic enterprises to invest a portion of their turnover in research, development, and technology upgrading during an MSME event in Greater Noida on September 1. He highlighted fields like drones, artificial intelligence, robotics, and quantum technologies as key areas for growth.

Funding and Testing Support

The ADITI scheme offers grants of up to $2.66 million, or ₹25 crore, for eligible projects in artificial intelligence, advanced cyber technology, and semiconductors. To help smaller firms test their products, India's Defence Testing Portal provides access to facilities across 24 DRDO laboratories under the VIMARSH framework. In June 2026, a two-day seminar in New Delhi brought together more than 150 start-ups and MSMEs to explain procurement procedures and user trials.

Technology Transfer and Growth

In August 2026, the Defence Ministry approved the transfer of DRDO-developed technologies for all conventional missile systems to local industries for domestic production. Total defence production grew by 110 percent from $9 billion in the 2020-21 financial year to ₹1.78 lakh crore in the 2025-26 financial year. Private industry contributed ₹42,000 crore to that total. Meanwhile, defence exports reached ₹38,424 crore, with products exported to over 80 countries. The government aims to reach $32 billion in annual defence production and $5.32 billion in exports by the year 2029.

Context

India's push to involve small businesses and private companies in military manufacturing aims to reduce reliance on foreign military imports and build a self-reliant domestic defence industry. By opening up testing labs and transferring state-developed missile technology, the government wants to turn local start-ups into global defense exporters.