The Defence industry of India is a strategically important sector in India. With the strength of over 1.39 million active personnel, it is the world's 4th largest military force and has the world's largest volunteer army. The total budget sanctioned for the Indian military for the financial year 2019 is $60.9 billion, about five times what it spends on education and welfare.
Despite having a modest internal defence industry, India is the largest arms importer in the world, with most of its arms purchases coming in from Russia. 12% of worldwide arms exports (by value) reach India.
The military budget of India is about 1.49% for year 2018-19 of the total GDP. However, it spends nearly an equal amount in importing arms from other countries.
Service/ department-wise allocation as a percentage of total defence estimates in 2017-18:
The Indian Army accounts for more than half of the total defence budget of India, with most of expenditure going to the maintenance of cantonments, salaries and pensions, instead of critical arms and ammunition.  
India has been spending worth nearly $3.5 billion to boost its ageing Soviet era military equipment. It has been pushing for greater indigenisation of the military industry as India imports around 70 per cent of its defence hardware mainly from Russia, Japan, Israel and United States.
India’s track record as an arms exporter has been modest. It exports arms to Mauritius, Myanmar, Sri Lanka, Vietnam and the UAE. In March 2011 New Delhi agreed to sell its first indigenously designed and built multi-role offshore patrol vessel (OPV) named Barracuda, to Mauritius. In March 2017, India finalised a deal with Myanmar for sale of indigenously developed lightweight torpedoes worth USD 37.9 million.Similar naval platforms were sold to Sri Lanka and Vietnam as well.
The production of Indian defence equipments prior to 2011 was completely in the hands of the Government of India. The Government of India also opened up the Foreign direct investment to 49% from the existing 26% and thereby increasing flow of funds from foreign countries. With the increase in FDI cap, private players such as companies from many developed countries will also be attracted to the Indian defence economy as they can have share in the Indian defence Companies.
|Name||Specialization||Revenue (As of 2015, except DRDO)||Employees (As of 2015)||Notes|
|Bharat Dynamics||Ammunition and Missile systems||₹32.81 billion (US$470 million)||3,183|||
|Bharat Electronics||Avionics||₹70.93 billion (US$1.0 billion)||9,952|||
|Bharat Earth Movers||Transport||₹28.02 billion (US$410 million)|
|Defence Research and Development Organisation||Research and Development||Annual Budget of 2018-19 ₹178.61 billion (US$2.6 billion)||30,000|||
|Garden Reach Shipbuilders & Engineers||Naval ships||₹16.94 billion (US$250 million)||3,133|||
|Goa Shipyard||Shipbuilding||₹6.81 billion (US$99 million)|||
|Hindustan Aeronautics Limited||Aerospace manufacturer||₹177.53 billion (US$2.6 billion)||32,108|||
|Mazagon Dock Limited||Shipbuilding|||
|Mishra Dhatu Nigam||Metallurgy|||
|Ordnance Factories Board||₹199.8271 billion (US$2.9 billion)||1,73,000|||
The Modi government in its first year cleared 39 capital procurement proposals, of which 32 proposals worth ₹889 billion (US$13 billion) (or 96% of value of total proposals) were categorized as Buy (Indian) and Buy and Make (Indian)—the top two prioritized domestic industry-centric procurement categories as per the defence procurement procedure (DPP).
In July 2015, the defence ministry eased export regulations and stopped demanding multiple assurances on end-use from foreign governments even for sale of components by Indian entities.
There are several Indian SMEs that cater to the Defence industry by supplying sub-assemblies and components and providing services like system integration. Under the Make in India initiative, these organizations are set to enhance their manufacturing and development efficiency, thereby contributing to making India self-reliant in defence production. Some of the system Integrators catering to the Defence sector in India are Tonbo Imaging, Alpha Designs, Astra Microwave and SLN Technologies among others.