Despite the recent crash of an Indian-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 output to 3 trillion rupees (about $33 billion) by 2029. It also aims to increase its defense exports to Rs 500 billion by the same year, among other goals. “Given the geopolitical ties India shares with its neighbors and its intention to modernize its armed forces, India’s defense budget remains elevated,” Macquarie Research said in a report on 20 November. According to data from the Stockholm International Peace Research Institute, India is the fifth largest military spender globally. An April report showed the country spent $86.1 billion on defense in 2024. India’s private sector companies accounted for 64% of the country’s defense exports in FY2025. India supplies equipment to more than 80 countries, including the US, 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 Rs 4,350, about 8.3% higher than its Monday closing price. L&T earns only 3% of its total revenue from defence, but is “one of the most trusted private enterprises in India to execute defense projects”. The company has partnerships with the Indian Ministry of Defense and the Research and Development Wing of the Armed Forces for the development and production of defense products, systems and platforms. In October, the company signed a contract with US-headquartered General Atomics Aeronautical Systems to manufacture medium-altitude, long-endurance unmanned aerial vehicles for the Indian armed forces. Macquarie is also overweight state-owned Bharat Electronics, India’s largest defense electronics maker. The brokerage has a target price of Rs 480, which is 16.8% higher than its Monday close. “It is a key Indian defense player in the new-age electronic warfare and missile ecosystem with a strong and diversified order backlog (US $8.5bn) across all platforms, including the export book,” Macquarie analysts said. The report also noted that Bharat Electronics has offices in New York, Muscat, Colombo and Southeast Asian markets to support export growth. “Given continuing multipolar tensions with countries around the world, there is a global shift in defense spending from a short-term war-driven boom in 2022-25 to a long-term rearmament phase through 2030,” Macquarie said. Despite the advanced technology of Western defense ecosystems, they face supply constraints in shipbuilding, munitions and electronics, making Asia’s manufacturing depth and cost-efficient scalability “inevitable”. Rising risks, rising costs In April, 26 civilians were killed in a terrorist attack by Islamist militants in the Indian-controlled region of Kashmir. New Delhi responded with airstrikes inside Pakistan, resulting in a four-day standoff that raised fears of a wider escalation at the roots of decades of hostility between the two countries. After the ceasefire on 10 May, Prime Minister Narendra Modi said that India would respond forcefully to future attacks and called the action against Pakistan a proof of the reliability of indigenously-made weapons. “If there is a terrorist attack on India, a befitting response will be given,” he said, adding that “India will not differentiate between a government sponsoring terrorism and a terrorist mastermind”. “During this operation, the reliability of our Made in India weapons was also proved,” the Prime Minister said, adding, “Time for Made in India defense equipment has come”. For fiscal year 2026, New Delhi has set a defense budget of around 6.8 trillion rupees to strengthen its military capabilities while reducing its dependence on foreign suppliers. India produced 1.54 trillion rupees in defense goods in fiscal year 2025, with indigenous production at a record of around 1.27 trillion rupees, the Indian government announced. State-owned enterprises accounted for 77% of total output, while the private sector contributed 23%, up from 21% in the previous fiscal year.
India’s $33 billion defense manufacturing ambition is on track. Here are the potential beneficiaries
