India’s push to become a global defence manufacturing powerhouse may be overlooking its most agile and innovative contributors — small businesses. While large corporations and public sector units dominate the spotlight, micro, small and medium enterprises (MSMEs) remain underutilised despite their potential to transform the sector.
A recent analysis highlights that MSMEs bring flexibility, cost efficiency and innovation, all of which are critical in modern defence ecosystems. However, India’s current approach continues to position them as supporting players rather than core drivers of defence production.
Although policy reforms have opened the defence sector to private participation, implementation gaps persist. MSMEs still face limited access to funding, certification systems and defence procurement networks, which restrict their ability to scale and compete effectively.
One of the major concerns is that budget allocations and policy benefits do not adequately reach smaller firms, leaving them struggling with high entry barriers. Quality certification processes and compliance requirements further complicate their participation in large defence projects.
The report suggests that India could learn from global examples where smaller firms play a central role in innovation. Technologies like drones are seen as a major opportunity area where MSMEs can lead, given their ability to rapidly prototype and adapt.
To address these gaps, a five-point action plan has been proposed. It focuses on improving access to finance, simplifying regulations, strengthening mentorship, enhancing quality control systems, and integrating MSMEs into large defence supply chains.
India’s defence ambitions are backed by rising budgets and initiatives like Make in India, but experts argue that true self-reliance will depend on shifting MSMEs from peripheral contributors to central players in the ecosystem. Without this shift, the country risks missing out on a crucial “force multiplier” in its manufacturing revolution.