Short answer: Aerospace manufacturing in India is growing around Indian primes that build for European and US manufacturers, such as Tata Advanced Systems' final assembly lines for the Airbus C295 in Vadodara and the Airbus H125 helicopter in Karnataka, which are building Indian supply chains for detail parts, assemblies and special processes [1][2]. In defence, the Ministry of Defence gives first preference to equipment designed and made in India and sets minimum indigenous content of 50% to 60% for its Indian purchase categories, so a European supplier's imported parts count against its Indian customer's bid [3]. The way in is therefore a structuring decision as well as a sales one: supplying from Europe is simplest, but a licensee, joint venture or own Indian subsidiary turns imported content into Indian content, subject to India's defence rules on foreign ownership, industrial licences and security [3][4][5].
Who this is for: managing directors, export directors and CFOs of French, German, Spanish and UK tier-2 and tier-3 suppliers of aerostructures, machined parts, systems and MRO services.
Aerospace companies in India: the programmes buying from suppliers
India's aerospace primes include private groups such as Tata Advanced Systems (TASL) and defence public sector undertakings (DPSUs) such as Hindustan Aeronautics (HAL) [6]. Programmes with foreign manufacturers set the demand a tier-2 supplier can follow:
| Programme | Indian partner and site | What it means for suppliers |
|---|---|---|
| Airbus C295 transport aircraft: 56 for the Indian Air Force, 16 built in Seville and 40 in India | TASL; final assembly in Vadodara (opened 28 October 2024); component assembly in Hyderabad | 13,000 detail parts made in India, 21 special processes certified and 37 India-based suppliers on board by October 2024 [1] |
| Airbus H125 helicopter | TASL; India's first private-sector helicopter assembly line, Vemagal, Karnataka (opened 17 February 2026) | First Indian-built H125 expected early 2027; a military H125M is planned there with a high share of local components [2][7] |
| Dassault Rafale fuselage sections | TASL; four production transfer agreements signed 5 June 2025 for a new plant in Hyderabad | First fuselage sections expected in 2028; up to two complete fuselages a month [8][9] |
| Safran LEAP and M88 engine MRO | Safran, Hyderabad: EUR 200m LEAP engine MRO centre inaugurated 26 November 2025, operational in 2026; ground broken for an M88 (Rafale engine) shop; TASL–Safran LEAP rotating-parts plant in Telangana (October 2025) | LEAP centre to reach 300 shop visits a year; Safran says it will multiply its sourcing in India five-fold [8][10] |
| Lockheed Martin C-130J | Tata Lockheed Martin Aerostructures, a joint venture since 2010, Hyderabad | Sole global source of C-130J tail assemblies, more than 260 built; TASL broke ground on a C-130J MRO facility in December 2025 and expects its first aircraft in early 2027 [8][11] |
Airbus says it buys components and services worth more than USD 1.5bn a year from India [2]. Aero India, the Ministry of Defence's biennial aerospace show, next runs on 8–12 February 2027 at Yelahanka, Bengaluru [12].
Civil or defence: who sets the rules
Civil programmes. Parts and processes for civil programmes are bought on the prime's own qualification and terms; AS9100, the aviation, space and defence quality standard, is also a reference for India's military aeronautical quality agency [13].
Defence. The rules below apply when the end buyer is the Ministry of Defence, a DPSU or a licensed defence manufacturer. The Ministry buys under the Defence Acquisition Procedure 2020 (DAP 2020) [3]; DPSUs, as government companies, also apply India's Make in India procurement order to their own purchases (see selling to India's public sector) [14].
Defence manufacturing in India: how the Ministry of Defence buys
DAP 2020 ranks five purchase categories in order of preference, each with a minimum indigenous content (IC), measured on the contract price excluding taxes and duties [3]:
| Category, in order of preference | Who supplies | Minimum indigenous content |
|---|---|---|
| Buy (Indian-IDDM): indigenously designed, developed and manufactured | Indian vendor | 50% |
| Buy (Indian) | Indian vendor | 60%, or 50% if designed in India |
| Buy and Make (Indian) | Indian vendor with a foreign manufacturer as partner | 50% of the Make portion |
| Buy (Global – Manufacture in India) | Foreign vendor (Indian vendors may also bid), then manufacture in India through its subsidiary, a joint venture or an Indian production agency, with transfer of technology | 50% |
| Buy (Global) | Foreign or Indian vendor | 30% for an Indian vendor; no minimum for a foreign vendor |
Source: [3].
Three further rules matter to a European supplier:
- Indian ownership for the top categories. In Buy (Indian-IDDM), the Make categories, development-cum-production partnerships and the strategic partnership model, the "Indian vendor" must be more than 50% owned and controlled by resident Indians, which caps foreign investment at 49% [3]. A joint venture you control can supply such a vendor but cannot be one.
- Import bans. Weapons and platforms on the Ministry's import-ban list can be bought only through the Indian categories or, where nothing is bought off the shelf, Buy (Global – Manufacture in India) [3].
- Offsets. Offsets apply only to Buy (Global) purchases where the Buy portion is INR 2,000 crore (about EUR 187m) or more, never to single-vendor cases, including inter-governmental agreements and US Foreign Military Sales; the Defence Acquisition Council can waive them [3]. An Indian vendor below 30% IC in Buy (Global) must discharge offsets too [3].
The draft DAP 2026. In February 2026 the Ministry of Defence published a draft Defence Acquisition Procedure 2026 for comment; according to the Ministry, it would cut the five purchase categories to four and raise the minimum indigenous content for Buy (Indian-IDDM) from 50% to 60% [15]. It had not been notified by 20 October 2026, so DAP 2020, including its offset rules, still applies; base category and offset plans on the final text.
Licences, ownership and security for defence work in India
- Foreign ownership. A company seeking a new industrial licence for defence manufacturing may take up to 74% foreign investment without approval; above 74% needs government approval, given where it is likely to bring modern technology or for other recorded reasons [4]. A company not seeking a licence may take up to 49% with a declaration to the Ministry of Defence within 30 days, more only with approval, and all foreign investment in the sector needs Ministry of Home Affairs security clearance [4]. DPIIT was consulting industry on easing these limits in August 2026, with no decision reported [16]. The full rules are in FDI in India: rules, routes and approvals (2026) (ATB Legal).
- Industrial licence. Defence manufacturing that needs an industrial licence under the Industries (Development and Regulation) Act 1951, or a licence for small arms and ammunition under the Arms Act 1959, is decided by DPIIT with the Ministries of Defence and External Affairs [4]. Check whether your part is a licensable defence item before choosing a route.
- Security. Licensed defence manufacturers follow the Ministry's Security Manual for Licensed Defence Industries (June 2025): Category A covers products such as aircraft, propulsion and radars, Category B semi-finished products and sub-systems such as wing assemblies and avionics [5]. Staff working on defence design, development or production, including a foreign collaborator's employees, must be security-cleared [5].
- Supplier registration. Firms supplying airborne stores to the armed forces through central purchasing must be registered with the Directorate General of Aeronautical Quality Assurance (DGAQA), as design-and-production houses, production shops or MRO providers; a foreign manufacturer registers through its authorised Indian dealer once the Indian defence attaché has verified it. Registration lasts five years, three for a dealer [13].
Routes in: five ways for a European tier-2 supplier
| Route | Counts as Indian content? | Control and capital | Main approvals | Fits when |
|---|---|---|---|---|
| Direct supply from Europe to an Indian prime | No | Full control; no capital in India | The prime's qualification; DGAQA if selling to the armed forces | Your parts are a small share of the prime's imports |
| Through your European customer's India programme | Only what is made in India | As today | Your customer's | Your customer, such as Airbus, is already localising |
| Joint venture with an Indian company | Yes | Shared; above 49% foreign, not an IDDM or strategic-partnership "Indian vendor" | FDI route; industrial licence if licensable; security clearance | The partner brings customers, a licence or a site |
| Licence or transfer of technology to an Indian manufacturer | Yes, the Indian value added | Little capital; know-how leaves your control | The licensee's licence and clearances | Volumes are too small for your own plant |
| Own Indian subsidiary | Yes | Full control; most capital | For licensable defence items, up to 74% without approval with a new industrial licence; 100% only with government approval | A long programme pipeline justifies a plant |
Sources: [3][4][5][13].
Joint-venture terms, from reserved matters to exit, are covered in Joint venture in India or acquisition: deal structure and shareholder protections (ATB Legal).
Shortlisting and checking an Indian machine shop or licensee is covered in finding and checking an Indian partner, and the choice between a wholly owned plant, a joint venture and contract manufacturing in wholly owned, joint venture or contract manufacturing in India. A licensee will usually need new machining centres and automation (see selling industrial automation through Indian system integrators).
What the UK and EU trade deals change
Neither agreement changes defence buying. The UK–India trade agreement (CETA), in force since 15 July 2026, excludes arms, ammunition, war materials and security purchases from its procurement chapter, and the Ministry of Defence is not a covered buyer [17][18]. The EU–India agreement, concluded but not signed or in force [19], would remove India's duties of up to 11% on almost all aircraft and spacecraft products, mostly over five years [20], which helps parts shipped from Europe to civil programmes. For the wider European picture, see India for European companies.
Worked example (illustrative)
Hypothetical. FX: INR 107 = EUR 1 (rounded exchange rates, October 2026). Values exclude taxes and duties. The Indian value-added shares are our assumptions.
A French tier-2 maker of machined aluminium and titanium structural parts (see the France–India corridor) supplies an Indian prime bidding for a Buy (Indian) contract worth EUR 100m (INR 1,070 crore). Buy (Indian) needs 60% IC: INR 642 crore [3]. With the French parts imported, the prime's plan reaches INR 615 crore (57.5%), INR 27 crore (EUR 2.52m) short. The French package is worth EUR 6m (INR 64.2 crore) over the contract.
| French parts made… | Indian content added, INR crore | Prime's IC | Buy (Indian)? |
|---|---|---|---|
| In France, shipped | 0 | 615.0 ÷ 1,070 = 57.5% | No |
| By an Indian licensee, 45% Indian value added (billet and licence fee imported) | 0.45 × 64.2 = 28.9 (EUR 2.70m) | 643.9 ÷ 1,070 = 60.2% | Yes, by INR 1.9 crore |
| By an own Indian subsidiary, 60% Indian value added | 0.60 × 64.2 = 38.5 (EUR 3.60m) | 653.5 ÷ 1,070 = 61.1% | Yes, by INR 11.5 crore |
What the numbers show. - Exporting can cost the prime the category. At 57.5% the bid fails Buy (Indian); the prime must localise elsewhere or replace the supplier. - A licence only just works. A small rise in imported billet would push the prime below 60%. DAP 2020's indigenous-content method excludes imported materials and licence and royalty fees paid out of India, as the example does [3]; the request for proposal sets the exact method. - A subsidiary gives headroom but needs capital, and if the parts are licensable defence items, foreign ownership above 74% needs approval [4]. - Under Buy (Indian-IDDM) the 57.5% plan would pass the 50% floor, but only an Indian-owned and Indian-controlled prime with its own design may bid [3].
Risks and common mistakes, ranked
- Pricing as an exporter when the customer needs Indian content. Imported parts can cost an Indian prime its category [3].
- Taking control of a joint venture meant to bid in the Indian-owned categories. Above 49% foreign it is not an "Indian vendor" there [3].
- Counting on offsets to fund entry. They apply only to large Buy (Global) contracts, and the draft DAP 2026 would revise the procedure [3][15].
- Starting defence work before security clearance of staff, including the foreign collaborator's [5].
- Licensing without fixing IC data. The licence must give the prime the cost data it needs to prove indigenous content.
- Not checking whether a part is a licensable defence item before choosing the route [4].
Checklist to forward internally
- Target programmes listed: civil (Airbus, Lockheed and others) and defence (Ministry of Defence, DPSUs)
- For each defence bid: purchase category, minimum IC and our parts' share of the prime's imports
- Route chosen: direct, via our customer's India programme, joint venture, licence or subsidiary
- Ownership plan tested against 49% (Indian-vendor categories) and 74% (defence FDI without approval)
- Industrial-licence status of each part confirmed
- Security-clearance timetable for staff and foreign collaborators
- DGAQA registration if supplying airborne stores to the armed forces
- Export-control classification (India's SCOMET list; EU and national military and dual-use lists) for drawings, software and parts
- Civil MRO: approval route with India's aviation regulator (DGCA) scoped before investing
How ATB Corporate can help
ATB Corporate advises companies and investors on entering, structuring and operating in India and the UAE: choosing the entry route and holding structure, tax and exchange-control planning, regulatory compliance, and setting up and running the local business. To discuss your plans, contact ATB Corporate.
FAQ
Can a foreign company manufacture defence equipment in India?
A foreign company can manufacture defence equipment in India through an Indian company in which it holds up to 74% without government approval, if that company is seeking a new industrial licence; above 74% needs approval, and all foreign investment in defence needs Ministry of Home Affairs security clearance [4]. The Indian company must also hold the industrial licence and follow the Ministry of Defence's security manual [4][5].
What is Buy (Indian-IDDM) in Indian defence procurement?
Buy (Indian-IDDM) is the Ministry of Defence's highest-priority purchase category: products indigenously designed, developed and manufactured by an Indian vendor with at least 50% indigenous content [3]. The vendor must be more than 50% owned and controlled by resident Indians, so a company with more than 49% foreign investment cannot bid in it [3].
How much indigenous content does an Indian defence contract need?
An Indian defence contract needs 50% indigenous content in Buy (Indian-IDDM), 60% in Buy (Indian) (50% if designed in India), 50% of the Make portion in Buy and Make (Indian) and 50% in Buy (Global – Manufacture in India), measured on the contract price excluding taxes and duties [3]. An Indian vendor in Buy (Global) needs 30%, or must discharge offsets [3]. A draft DAP 2026, not yet in force, would raise the Buy (Indian-IDDM) minimum to 60% [15].
Do defence offsets still apply in India?
Defence offsets still apply in India, but only to Buy (Global) purchases where the Buy portion is worth INR 2,000 crore or more, and never to single-vendor cases, including inter-governmental agreements and Foreign Military Sales [3]. A draft DAP 2026, published for comment in February 2026, would revise the procedure, but until it is notified DAP 2020's offset rules stand [3][15].
Which aerospace companies in India build for Airbus and Lockheed Martin?
Tata Advanced Systems builds the Airbus C295 in Vadodara and the Airbus H125 helicopter at Vemagal in Karnataka, is setting up a Rafale fuselage plant in Hyderabad for Dassault, and its joint venture with Lockheed Martin is the sole global source of C-130J tail assemblies [1][2][8][9][11]. Among state-owned companies, Hindustan Aeronautics is one of the defence public sector undertakings under the Department of Defence Production [6].
Do European suppliers need DGAQA registration to supply the Indian armed forces?
European suppliers of airborne stores sold to the Indian armed forces through central purchasing need DGAQA registration, normally through an authorised Indian dealer or an Indian licensed manufacturer, after the Indian defence attaché in their country has verified the manufacturer [13]. A firm's registration lasts five years (a foreign manufacturer's dealer, three), and an ISO 9001 or AS9100 certificate is among the documents required [13].
Related reading
- Selling to India's public sector as a European supplier
- Finding and checking an Indian partner: distributor, system integrator, contract manufacturer or licensee
- Industrial automation in India: entering through local system integrators
- India market entry for French companies
- Wholly owned, joint venture or contract manufacturing: the foreign manufacturer's India structure
- India manufacturing entry for foreign companies
- FDI in India: rules, routes and approvals (2026)(ATB Legal)
- Joint venture in India or acquisition: deal structure and shareholder protections(ATB Legal)
Sources
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- Department for Promotion of Industry and Internal Trade, Press Note No. 4 (2020 Series), Review of FDI policy in the defence sector, para 5.2.6 as revised (September 2020) — https://www.dpiit.gov.in/static/uploads/2025/07/7c1d98a96b48dd8a8ff156f1e527b671.pdf (accessed 16 October 2026)
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Disclaimer: This article is general information, not legal or tax advice; the worked example is hypothetical, and India's defence procurement, FDI and licensing rules change, so check the current rules and the request for proposal before committing.