Understanding defence procurement in India means understanding how a country of India’s size equips an Army, a Navy and an Air Force with everything from rifles and radars to submarines and fighter aircraft. The process is governed by a detailed rulebook, the Defence Acquisition Procedure, and by a set of institutions that decide what is needed, how it is acquired, who supplies it and how much of it must be made in India. Because the sums involved are large and the consequences for national security are serious, the system places heavy emphasis on checks, trials and approvals.
Over the last three decades the procedure has evolved from a purchase-centred system to one that seeks to build domestic capability. Terms such as Buy (Indian-IDDM), offsets, positive indigenisation lists and the Defence Acquisition Council are now part of everyday defence reporting. This explainer describes these concepts in plain language, tracing the framework from its origins to the present self-reliance push, and explaining the stages that a proposal passes through before it becomes a contract.
| Item | Details |
|---|---|
| Governing document | Defence Acquisition Procedure (DAP) 2020, successor to the Defence Procurement Procedure (DPP) |
| Nodal ministry | Ministry of Defence, through the Department of Defence and its Acquisition Wing |
| Top approving body | Defence Acquisition Council, chaired by the Defence Minister |
| First formal procedure | Defence Procurement Procedure introduced in 1992, with major editions in 2002 and later years |
| Offset policy | Introduced in 2005 for large foreign purchases |
| FDI in defence | Opened to private sector in 2001; limits liberalised over time |
| Indigenisation tool | Positive indigenisation lists, the first notified in August 2020 |
| Core objective | Self-reliance (Atmanirbhar Bharat) in defence equipment |
How the Armed Forces Acquire Equipment
Defence acquisition in India is divided broadly into two kinds of spending. Capital acquisition covers the purchase of major platforms and systems, such as aircraft, ships, tanks, artillery and radars, which are expected to last for years. Revenue procurement covers stores, spares, ammunition, maintenance and consumables needed to keep the forces functioning day to day. Capital acquisition follows the Defence Acquisition Procedure, whereas revenue procurement follows a separate manual.
The basic flow of a purchase
Every major purchase begins with the need identified by the Army, Navy or Air Force, usually after assessing threats, ageing equipment and operational plans. This need is then written up as a set of qualitative requirements, which the Services must justify. The proposal goes to the Defence Acquisition Council for approval in principle, then to a request for proposals, trials, commercial negotiation and finally to a competent financial authority for sanction. Large contracts require clearance from the Cabinet Committee on Security.
Evolution: From DPP to DAP 2020
For much of the post-independence period, purchases were handled through general government rules without a dedicated defence procedure. The Kargil conflict of 1999 and the report of the Kargil Review Committee, along with the subsequent Group of Ministers’ review, led to a restructuring of national security institutions and a push for transparency in acquisitions. The first formal Defence Procurement Procedure was brought out in 1992, and a more comprehensive version followed in 2002 and was revised in several later editions, including those of 2005, 2006, 2008, 2011, 2013 and 2016.
The Defence Acquisition Procedure of 2020 replaced the DPP of 2016, taking effect in October 2020. Its stated aims were to speed up decision-making, increase indigenous content and promote the Make in India initiative. It brought in categories for leasing, revised the treatment of offsets and strengthened the emphasis on indigenously designed, developed and manufactured equipment. The procedure is amended from time to time, and later revisions may modify specific provisions, so the current edition should be consulted for the latest rules.
The Defence Acquisition Council
The Defence Acquisition Council, usually abbreviated as DAC, is the highest decision-making body for defence procurement. It was set up in 2001 following the recommendations of the Group of Ministers that reviewed national security after the Kargil conflict. It is chaired by the Defence Minister, and its members include senior officials of the Ministry of Defence and the heads of the three Services.
What the DAC does
- Grants Acceptance of Necessity (AoN), which is the first formal approval for a capital acquisition proposal.
- Decides the broad category under which a project will be procured, such as an indigenous or an imported route.
- Gives policy guidance on long-term plans, including the Services’ perspective plans.
- Approves the procurement of equipment that has been designed and developed within the country.
Supporting the DAC is the Defence Procurement Board, which is headed by the Defence Secretary and oversees the implementation of the procedure, along with the Defence Production Board for production-related issues. Contracts above a certain value are cleared by the Cabinet Committee on Security.
Acquisition Categories Under the DAP
The category assigned to a project determines how much of the equipment must be built in India and by whom. The categories have evolved over successive editions, and they reflect a clear priority order, with indigenous design and manufacture at the top and direct imports at the bottom.
| Category | Meaning |
|---|---|
| Buy (Indian-IDDM) | Indigenously Designed, Developed and Manufactured; the highest preference category, with a minimum indigenous content requirement |
| Buy (Indian) | Equipment bought from Indian vendors with a stipulated level of indigenous content, though the design may not be Indian |
| Buy and Make (Indian) | Purchase of some units from a vendor, followed by manufacture in India under transfer of technology |
| Buy (Global – Manufacture in India) | Purchase from a foreign vendor who sets up production in India through an Indian entity |
| Buy (Global) | Outright import from a foreign supplier, normally used only when no Indian option exists |
The exact list and the percentage thresholds of indigenous content have been revised between editions, so the principle is more important than any single figure: wherever possible, equipment should be designed and produced in India, and imports are a last resort.
The Make Procedures and Strategic Partnerships
Alongside straightforward purchases, the DAP contains routes aimed at developing new capability with industry. These are commonly known as the Make procedures.
- Make-I: projects in which the government provides a major share of the funding for prototype development by industry.
- Make-II: projects in which industry develops prototypes at its own cost, with an assurance of potential orders if the equipment meets the requirements.
- Make-III: items that can be manufactured in India for import substitution, without government funding for development.
The Strategic Partnership model
Introduced in 2017, the Strategic Partnership model was designed for large platforms such as submarines, fighter aircraft, helicopters and armoured vehicles. Under it, selected Indian private companies are paired with foreign original equipment manufacturers to build the platform in India, with technology transfer. The idea is to create an industrial base that can design, produce and support complex systems over decades, rather than depend on repeated imports.
Offsets in Defence Contracts
The offsets policy was brought in with the DPP of 2005. Under it, when India signs a large contract with a foreign vendor, the vendor is required to invest a share of the contract value in the Indian defence or aerospace sector. In its original form, the requirement was a minimum of thirty per cent of the contract value for deals above a specified threshold. The vendor can discharge the obligation by buying Indian products, setting up joint ventures or transferring technology.
The offsets mechanism has been a subject of debate. The Comptroller and Auditor General reviewed its performance in a 2018 report and raised concerns about how well it had achieved its goals. The DAP 2020 and subsequent revisions modified the policy, including exempting some categories of deals from the obligation. For readers, the key point is that offsets were an attempt to use India’s large purchasing power to build domestic capability, and the policy has been refined in response to experience.
Foreign Direct Investment in Defence
For many years, defence manufacturing was reserved for the public sector. In 2001, the sector was opened to private Indian companies, with foreign investment permitted up to a limited share. The limit was raised in 2014 and again in 2020, when the government announced an increase in the automatic route to seventy-four per cent, with higher proportions subject to government approval where access to modern technology is involved.
Related industrial reforms
- The industrial licensing regime for defence items was progressively eased.
- The Ordnance Factory Board was converted into seven government-owned corporate entities in October 2021.
- Two Defence Industrial Corridors, in Uttar Pradesh and Tamil Nadu, were announced in 2018.
- The Innovations for Defence Excellence (iDEX) scheme, launched in 2018, supports start-ups and small firms.
These steps are meant to widen the base of suppliers, bringing in private companies, small and medium enterprises and start-ups alongside the established public sector undertakings.
Positive Indigenisation Lists and Import Restrictions
One of the most visible tools of the self-reliance push is the positive indigenisation list. Starting in August 2020, the Ministry of Defence has notified lists of items, including platforms, weapons, sensors and sub-systems, that the armed forces will not import after a stated timeline. The first list contained 101 items, and several further lists have followed, for both the Services and the public sector undertakings.
The lists give Indian industry a clear market signal. Because imports of listed items are barred after the specified date, companies can invest in design and production with greater certainty of orders. Alongside the lists, a portion of the capital acquisition budget is earmarked for procurement from domestic industry, which gives local firms a predictable share of the demand. The lists are also updated periodically, and they are complemented by portals that connect the forces’ needs with the capabilities of industry and research institutions.
Self-Reliance and the Wider Defence Industrial Base
India has been among the world’s largest importers of major defence equipment for many years, a position that has prompted a long-term effort to build indigenous capacity. The institutions at the core of this effort include the Defence Research and Development Organisation, which designs systems; the public sector undertakings such as Hindustan Aeronautics Limited, Bharat Electronics Limited and the shipyards; and a growing group of private companies.
Notable examples of indigenous programmes
- The Tejas light combat aircraft, designed by the Aeronautical Development Agency and built by HAL.
- The Arjun main battle tank, developed by DRDO.
- The INS Vikrant, the first aircraft carrier designed and built in India, commissioned in 2022.
- The Advanced Towed Artillery Gun System and various missile and radar programmes.
The self-reliance push does not mean that imports have ended. India continues to buy advanced systems from several countries where indigenous alternatives are not yet available, often combining purchases with technology transfer and local production.
Challenges and Criticisms
The procurement process has frequently been described as slow. Trials, multiple committees, financial scrutiny and the need to guard against irregularities can stretch timelines over many years, and delays have affected the modernisation of the forces. Procurement has also been affected by past controversies, which led to blacklisting policies and more cautious decision-making.
Reforms have tried to address these issues through fast-track and emergency procurement provisions, more transparent trials, time limits at each stage and greater use of indigenous options. Observers also note the challenge of matching the pace of technological change with the long cycles of development, and the need to keep a balance between cost, quality and capability. Defence procurement thus remains a continuing exercise in balancing speed, accountability and self-reliance, and this is why the rules are reviewed at regular intervals. Last reviewed: 2 October 2026.
Frequently Asked Questions
What is the Defence Acquisition Procedure?
The Defence Acquisition Procedure, or DAP, is the Ministry of Defence rulebook that governs how the armed forces buy major equipment. The 2020 edition replaced the earlier Defence Procurement Procedure and put greater emphasis on indigenous design, development and manufacture.
What does Buy (Indian-IDDM) mean?
IDDM stands for Indigenously Designed, Developed and Manufactured. It is the most preferred acquisition category, covering equipment that is designed and built in India with a prescribed minimum level of indigenous content.
What is the role of the Defence Acquisition Council?
The Defence Acquisition Council is the apex body for defence procurement decisions and is chaired by the Defence Minister. It grants the Acceptance of Necessity for proposals and decides the broad category of procurement.
What are defence offsets?
Offsets require a foreign vendor to invest a share of a large contract’s value in India’s defence or aerospace sector. They were introduced in 2005 to build domestic capacity, and the policy has been modified over time.
How much foreign investment is allowed in Indian defence?
The sector was opened to private companies in 2001, and the permitted foreign investment limit was later raised. Since 2020, up to seventy-four per cent is allowed under the automatic route, with higher stakes needing government approval.
What are positive indigenisation lists?
These are lists of defence items that the Ministry of Defence has notified as not to be imported after a stated date. The first was issued in August 2020 and contained 101 items, and later lists have extended the approach.
