India’s defence tech sector is undergoing a significant transformation, driven by increased venture capital interest and policy support. With nearly 90% of the $78 million raised by defence tech startups in the past decade occurring in 2025 alone, the sector is poised for growth. However, the future of defence technology is increasingly AI-driven, and India faces challenges in this area.
### The Current State of Defence AI in India
Despite the momentum, India’s defence tech ecosystem has not yet achieved the scale of global players like Palantir or Anduril. While India’s software capabilities are strong, manufacturing at the required scale and precision remains a challenge. Amardeep Singh, founder of Armory, a drone defence company, highlights this as a critical gap. The country’s increased defence budget and initiatives like the iDEX scheme offer support, but attracting talent remains a bottleneck. Defence startups struggle to compete with compensation levels in mainstream tech sectors, despite the mission-driven nature of the work.
### Hardware and Software Dynamics
India’s defence stack is increasingly shaped by a software-first approach, but hardware dependencies persist. Much of the core electronics and intellectual property still rely on foreign sources, limiting true self-reliance. Companies like Armory are focusing on software-defined hardware to allow for upgrades without replacing physical components. Current priority areas include computer vision, logistics optimisation, and edge-deployed AI. However, the core IP for components like drone controllers often originates abroad, highlighting the need for deeper indigenisation.
### Venture Capital and the Road Ahead
Venture capital interest in defence tech is growing, with VCs backing startups in drones, autonomous systems, and digital warfare. Investors like Abhishek Prasad of Cornerstone Ventures see opportunities in autonomous defence systems and cyber defence, which offer commercial upsides beyond government markets. The focus is shifting from hardware to system intelligence, with successful startups likely to serve both defence and commercial markets. India’s challenging terrain offers a competitive edge, as systems built for local conditions can meet global standards.
Looking ahead, India’s defence tech sector must address its manufacturing and talent challenges to fully capitalise on AI-driven opportunities. Continued investment and policy support will be crucial as the country aims to build a self-reliant defence ecosystem.
