India is preparing to launch a $234 million incentive program aimed at ramping up domestic production of drones and related technologies, in response to growing tensions with Pakistan and to reduce reliance on foreign components. The new three-year initiative, led by the civil aviation ministry, comes in the aftermath of a recent military confrontation with Pakistan, which saw both nations engage in missile exchanges following the deadly Pahalgam attack.
The incentive package, confirmed by two government officials and one industry source, will support the development of civil and military drones, components, software, counter-drone systems, and services. The program marks a major expansion over India’s previous drone policy, which offered just 1.2 billion rupees in production-linked incentives in 2021 and struggled to spark significant growth among domestic start-ups.
The conflict in early May highlighted the escalating drone arms race between the two nuclear-armed neighbours. Indian Defence Secretary Rajesh Kumar Singh acknowledged that both loitering and kamikaze drones were heavily used during the exchanges, and said the experience underscored the urgent need for greater indigenisation of drone technologies.
India’s new program will push for at least 40 percent of key drone components—such as motors, sensors, and imaging systems—to be made domestically by the end of the 2027–28 fiscal year. The government has also indicated it will offer additional incentives to manufacturers that source parts within the country. While India has banned the import of fully assembled drones, components from countries like China are still widely used, particularly in commercial and lower-end military applications.
The Small Industries Development Bank of India (SIDBI) will play a key role in the rollout by offering low-interest loans to drone companies to cover working capital, research, and development costs.
India, which has traditionally relied on Israeli-made drones for military use, is shifting toward a self-reliant model as local firms begin to offer more cost-effective options. Government sources told Reuters that India may invest up to $470 million over the next two years in UAV technology as part of a phased strategy to build a robust domestic ecosystem.
With over 600 companies currently involved in drone production and related industries, officials hope the new financial support will supercharge innovation and production capacity, solidifying India’s place in the emerging global drone economy while responding to evolving security threats in the region.
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