Recent India-Pakistan clashes showed that unmanned aerial vehicles (UAVs) are now central to modern warfare in South Asia.
The Indian government has responded with emergency drone procurements, changes in defense policies and increased incentives to boost domestic production of UAVs. On July 4, the government unveiled a US$234 million incentive for domestic drone manufacturing.
India’s UAV journey dates back to 1993 with the Defense Research and Development Organisation’s (DRDO) Kapothaka project.
It entered the civilian sector only in 2021 when the government removed several licensing requirements and launched the Digital Sky Platform, an online portal developed by the Directorate General of Civil Aviation (DGCA) to manage and regulate civil drone operations.
Since then, India’s drone industry has made significant progress, with numerous startups focusing on developing fully indigenous drones. Funding for drones has soared from $3-4 million in 2015-16 to $108 million in 2024.
India now aims to have at least 40% of key drone components manufactured domestically by the end of fiscal year 2028, according to a Reuters report quoting government sources.
The question today is thus no longer whether India can build drones. Rather, the question is: Can India build an ecosystem resilient enough to make drones fast, cheap, secure and entirely indigenously?
Today, more than 50 Indian drone companies are engaged specifically in manufacturing batteries, propellers, flight controllers and Global Navigation Satellite System (GNSS) parts used in drones. Overall, around 500 Indian startups are currently involved in the drone industry.
However, many of these startups are merely assembling drones, rather than manufacturing them from start to finish. Local companies such as IG Drones and Optemius Unmanned Systems, which claim to have 75-80% of their drone parts made in-house, are still importing their high-value components, most of which come from China.
Despite the government’s ban on fully built Chinese drones, they can still be procured via e-marketplace portals.
Critical components imported from the Chinese supply chain are vulnerable to jamming, cyberattacks or remote hijacking. Meanwhile, China’s 2017 intelligence law mandated local businesses to hand over data to the government on demand, thus creating a backdoor for unauthorized access to critical information.
Besides cyber risk, geopolitical tensions can also impact drone supply chains. For instance, in 2023, China restricted the export of important drone components to stop their use in the Russia-Ukraine war.
The US has also imposed similar restrictions to ensure that its drone parts aren’t used for military purposes without approval. India has procured drones from Israel and also imports drone components from Taiwan. Both countries, prone to geopolitical tensions, have the potential to suddenly disrupt India’s drone industry.
However, the problem isn’t just what India imports; rather, it’s why it has to do so. First of all, it is not feasible for a drone company to manufacture every component of a drone. Many components are not required on a large scale, but still are critical in drone manufacturing.
These include lithium-polymer cells and materials such as titanium and Inconel, which are essential for durability and heat resistance, and require advanced manufacturing technology that China possesses but is still in its early stages of domestic development in India.
Furthermore, there are component-only startups that develop only parts, but have fallen short of developing anything unique because they are capital-strapped and therefore reluctant to invest in research and development (R&D).
For decades, India’s R&D has remained stagnant at around .64% of GDP, far behind countries like China, the US or Israel. The seed capital provided by Innovation for Defence Excellence (iDEX) for the development of military grade products remains inadequate to scale up production.
The struggle of Indian startups is not just technological but also structural. One major issue lies in the fragmented and uncertain demand for drones. In the commercial sector, demand is seasonal and tied to government procurement cycles. In the defense sector, demand is predictable but fiercely competitive.
The Indian armed forces often demand advanced UAV capabilities at disproportionately low costs, making it nearly impossible for startups to scale sustainably. In some cases, private firms have offered prototypes for free or at loss-making prices, hoping for future government orders — a strategy that raises the risk of hidden downstream costs being passed on to end-users.
The booming market of gray drones also presents a challenge to these startups. In cities like Chennai and Delhi, drone parts are sold openly without Goods and Services Tax, at a significantly lower price. This puts startups at a disadvantage, as they must bear the burden of a 28% GST on manufacturing and selling their products.
To be sure, India has the capacity to lead in drone technology. However, intent without infrastructure and policy without an ecosystem will only take the country so far. What India needs to build is a clustered ecosystem, a “Drone Valley” where startups can share R&D infrastructure, machine tools and component designs, allowing them to specialize rather than duplicate efforts.
Unified digital portals, simplified drone certification sandboxes and state-level, single-window clearances can go a long way in making India’s drone ecosystem more agile and competitive.
India can adopt global norms like those promoted by the American Society for Testing Materials (ASTM) and introduce a “Drone Mark” certification that enhances the global trustworthiness of Indian-made UAVs.
To transform its drone industry into a strategic asset, India must shift from reactive procurement to proactive innovation. It must build not just drones, but an entire industrial and digital architecture that supports them. And as the recent clashes with Pakistan showed, time is of the strategic essence.
Prisie L Patnayak is a PhD candidate at the Centre for Indo-Pacific Studies, Jawaharlal Nehru University, New Delhi
