Make in India: Defence Sector Opportunities for Russian Companies

India’s defence sector is undergoing a significant transformation under the “Make in India” initiative, aiming to strengthen domestic manufacturing capabilities while welcoming advanced foreign technology and partnerships.

For Russian businesses, this transformation offers a timely opportunity to expand their footprint in a market that has historically relied on Russian defence technology while now seeking local manufacturing, technology transfer, and strategic joint ventures. If you plan to start a defence firm in India, understanding the evolving legal landscape, sectoral opportunities, and compliance requirements is essential to establish a sustainable and profitable presence in one of the world’s fastest-growing defence markets.

India’s Defence Modernisation and Strategic Alignment with Russia

India is actively pursuing defence modernisation to enhance its national security and reduce dependence on imports by promoting indigenous production. Russia has traditionally been a key supplier to India’s defence forces, with cooperation in aircraft, tanks, submarines, and missile systems.

This strong strategic alignment provides a solid foundation for Russian businesses seeking to start a defence firm in India, especially in areas requiring advanced technology, maintenance and servicing of existing platforms, and co-development of future defence systems. By leveraging the Make in India policy, Russian companies can collaborate with India’s Defence Public Sector Undertakings (DPSUs) and private players while establishing manufacturing facilities aligned with India’s self-reliance goals.

Opportunities under Make in India

The Make in India initiative emphasises the development of local manufacturing capabilities in critical defence technologies, offering opportunities across aerospace, naval systems, armoured vehicles, missile systems, and electronics.

Russian companies can explore joint ventures with Indian partners for manufacturing components and assembling platforms for the Indian Armed Forces, creating local supply chains, and participating in India’s offset obligations under major defence contracts. Additionally, the Indian government’s push for exports of domestically manufactured defence equipment creates avenues for Russian firms to position India as a regional manufacturing hub.

Starting a defence firm in India under this framework allows Russian businesses to meet local procurement conditions while leveraging cost advantages for regional and global exports.

Legal Framework for Starting a Defence Firm in India

To start a defence firm in India, foreign investors must navigate regulations under the Defence Acquisition Procedure (DAP), the Arms Act, industrial licensing, and India’s Foreign Direct Investment (FDI) Policy.

Currently, up to 74% FDI is allowed under the automatic route for the defence sector, with beyond 74% permissible through government approval in cases that are likely to result in access to modern technology. Foreign companies intending to manufacture defence equipment in India need to obtain an industrial licence, requiring security clearances, technology details, and a commitment to meet the quality and security standards set by the Ministry of Defence.

It is critical for Russian companies to align their entry strategy with these regulations while ensuring compliance with the “Make in India” framework for ease of participation in tenders and government contracts.

Structuring Your Entry Strategy

Russian defence businesses have multiple options when considering how to start a defence firm in India. Establishing a wholly-owned subsidiary enables operational control and protects proprietary technology within the limits of FDI regulations. Alternatively, forming a joint venture with an Indian partner can facilitate faster market entry, leveraging the partner’s knowledge of local processes, supply chains, and licensing.

Strategic partnerships with DPSUs and Indian private defence companies under the Strategic Partnership Model can also provide an effective route to collaborate on high-value projects requiring advanced technologies. A clear entry strategy supported by strong legal agreements will ensure protection of intellectual property, efficient management of operations, and alignment with India’s defence procurement priorities.

Licensing, Vendor Registration, and Procurement Participation

Manufacturing defence equipment in India requires obtaining an industrial licence under the Arms Act and registering as a vendor with defence procurement authorities, DPSUs, and quality assurance bodies. Vendor registration involves demonstrating technical capabilities, financial stability, and adherence to India’s security and quality protocols. Once registered, Russian companies can participate in tenders, Request for Proposals (RFPs), and government-to-government deals under the Defence Acquisition Procedure.

Participation in procurement processes requires understanding India’s emphasis on indigenous content, technology transfer obligations, and quality standards, which are central to the Make in India vision for the defence sector.

Navigating Defence Offsets and Technology Transfer

India’s defence offset policy mandates foreign suppliers to reinvest a portion of their contract value into India’s defence ecosystem through technology transfer, investments in local manufacturing, and purchases from local vendors. For Russian businesses, fulfilling offset obligations strategically can enable smoother project approvals and help establish deeper partnerships with Indian defence stakeholders.

At the same time, technology transfer arrangements require careful legal structuring to protect proprietary technologies while meeting local content and offset requirements. Drafting comprehensive technology licensing agreements with clear clauses on confidentiality, permitted use, and dispute resolution is critical when transferring technology or setting up local manufacturing units.

Taxation, Customs, and Operational Compliance

Starting a defence firm in India involves planning for tax compliance, import duties on components, and Goods and Services Tax (GST) on domestic transactions. Some exemptions are available for defence-related imports, but these require precise documentation and government approvals.

Understanding India’s tax environment and customs procedures ensures efficient supply chain management while preventing delays and penalties that can affect project timelines. Russian companies should engage experienced tax advisors to structure transactions efficiently, manage compliance obligations, and leverage any applicable benefits under defence-specific exemptions.

Intellectual Property Protection in Defence Collaborations

Intellectual property protection is a critical aspect when establishing defence operations in India, particularly for technology-intensive Russian companies entering the market. Registering patents, trademarks, and designs in India before initiating technology transfer or joint development projects ensures legal protection against misuse or unauthorised duplication.

Additionally, including IP protection and confidentiality clauses in joint venture agreements, supply contracts, and technology licensing agreements can mitigate risks while maintaining compliance with Indian laws. Russia’s advanced defence technologies can find a secure place in India’s market by prioritising intellectual property strategies during the entry process.

Risk Management and Dispute Resolution

The defence sector involves long-term contracts, technology investments, and regulatory oversight, making risk management essential for foreign entrants. Russian companies should conduct comprehensive due diligence, assess the regulatory environment, and monitor compliance continuously to mitigate operational and legal risks.

Additionally, including arbitration clauses and defining governing law in agreements can facilitate smooth dispute resolution. India’s arbitration laws are supportive of enforcing foreign arbitral awards, offering confidence to foreign businesses operating in its defence sector. A clear risk management and dispute resolution strategy can protect business interests while supporting sustainable operations in India.

Leveraging India’s Defence Export Push

India aims to increase its defence exports while developing indigenous manufacturing capabilities, creating an opportunity for Russian businesses to utilise India as a manufacturing base for regional and global markets.

By setting up local manufacturing aligned with India’s Make in India policy, Russian defence firms can supply to the Indian Armed Forces while exploring export opportunities to other friendly nations. This approach aligns with India’s defence export strategy and can enhance the viability and profitability of Russian investments in India’s defence sector.

Conclusion

The Make in India initiative has opened the Indian defence sector to new opportunities for Russian businesses looking to start a defence firm in India. With a clear focus on promoting local manufacturing, technology transfer, and strategic collaborations, India offers a supportive environment for Russian defence companies that can align with its procurement needs while meeting regulatory and compliance obligations. A well-planned market entry, supported by expert legal and tax advisory, can ensure that Russian businesses navigate India’s defence sector effectively, protecting intellectual property, meeting offset obligations, and securing government contracts under India’s modernisation drive.

For Russian companies, the time is right to leverage the historical strategic relationship with India and contribute to its defence indigenisation while building a profitable and sustainable business in the country. By focusing on the right legal structures, compliance frameworks, and technology strategies, Russian defence businesses can confidently start a defence firm in India, partnering in its journey toward self-reliance and defence sector expansion.