Made-in-India drones get a $234 million lift in race against Pakistan, China: Report

India currently bans the import of finished drones but allows the import of parts.

India is preparing to launch a $234 million incentive programme to boost its domestic drone manufacturing capacity across civil and military sectors, Reuters reported, citing three sources familiar with the matter. The move comes in response to growing drone use in regional conflicts and an escalating arms race with neighbouring Pakistan, which has received drone support from China and Turkey.

The upcoming programme will run for three years and will offer financial support for manufacturing drones, components, software, counter-drone technologies, and services, two government officials and one industry executive told Reuters on condition of anonymity.

India’s renewed focus on unmanned aerial systems follows a four-day conflict with Pakistan in May, which marked the first time both nuclear-armed countries used drones extensively against each other. The incident is widely seen as the trigger for New Delhi’s decision to scale up indigenous drone production.

“During (the India-Pakistan) conflict there was quite a lot of use of drones, loitering munitions and kamikaze drones on both sides,” Indian Defence Secretary Rajesh Kumar Singh said last week. “The lesson that we’ve learned is that we need to double down on our indigenisation efforts to ensure that we build a large, effective, military drone manufacturing ecosystem.”

The new incentive scheme marks a sharp escalation from India’s earlier attempt, a Rs 1.2 billion production-linked incentive (PLI) scheme launched in 2021, which primarily targeted drone startups. That scheme struggled due to limited investor interest and lack of R&D capital, Reuters noted.

This time, India plans to include a wider range of beneficiaries and offer deeper financial backing. The Ministry of Civil Aviation will lead the initiative, with support from the Ministry of Defence. Both ministries did not immediately respond to requests for comment, Reuters said.

According to the two government sources who spoke to Reuters, the programme aims to ensure that at least 40 percent of key drone components are manufactured within India by the end of FY2028 (April–March). This would reduce India’s current dependence on imported parts, many of which still come from China, despite bans on importing complete drones.

India currently bans the import of finished drones but allows the import of parts. The government will also offer additional incentives to manufacturers who source components domestically.

The Small Industries Development Bank of India (SIDBI) will assist the programme by providing low-interest loans to drone makers for working capital and R&D, Reuters reported. This is expected to ease access to funds, especially for smaller firms and startups.

An industry source involved in the discussions told Reuters that more than 600 companies currently operate in the drone manufacturing and associated ecosystem in India. The government hopes to use this scheme to scale up existing businesses and attract new players into the growing sector.