Aviation and defence sector in India
The Indian government has set ambitious goals for the aviation and defence sector in India
Contact our experts here with no obligationIndia’s aviation sector has emerged as one of the fastest-growing sectors in the country in recent years. Domestic traffic accounts for about 69 per cent of total air traffic in South Asia, and by 2023, the country’s airports were handling about 1 billion flights a year.
India is the world’s third-largest aviation market after China and the US.
The top three largest market segments of India’s defence sector are military aircrafts, naval vessels and, missiles and missile defence systems. Military rotorcrafts, submarines, artillery, tactical communications, electronic warfare and military land vehicles are some of the other well-known segments.
India’s defence industry is an important sector of the economy. India’s demand for defence equipment has increased due to ongoing territorial disputes with Pakistan and China. For the past five years, India has been among the top importers of defence equipment to gain technological advantages over rival countries like China and Pakistan.
To reduce dependence on foreign countries for defence procurement, the government has introduced several ‘Make in India’ initiatives for the sector, making defence equipment manufacturing in India attractive.
Snapshot of the Indian aviation and defence sector in India
Aviation
- By 2025, airports in India expect domestic passenger traffic to comprise 81 million people, a CAGR of 5.6%.
- International passenger traffic will grow with a CAGR of 14.2% in 2025 to 18.5 million passengers.
- The Indian government is about to unveil 15 airport projects, including new terminals in Delhi, Lucknow and Pune.
- Over the past five years, domestic cargo traffic has grown with a CAGR of 3% and international cargo traffic with a CAGR of 2.7%.
Defence
- To modernise its armed forces and reduce dependence on foreign purchases, the government has launched several ‘Make in India’ initiatives to ramp up defence equipment production in the country.
- 25% of the defence budget has been earmarked for R&D, paving the way for innovation of new defence technologies in India.
- Green Channel Status Policy (GCS) has been introduced to encourage private sector investment in defence production. Also, since 2020, FDI through the automatic route has been allowed up to 74% and 100% through the government route.


Growth indicators of India's aviation and defence sector
Aviation
- Rising demand for air travel means India will need 2380 new commercial aircraft by 2038.
- According to a report titled ‘Travel market in India’, the travel market in India is expected to be worth over $125 billion by 2027.
- The Indian government has set a target of expanding the number of airports across the country from 140 to 220 by the end of 2026.
- There is also a plan to create 33 new domestic cargo terminals and 15 new flight schools, and more focus on unmanned aircraft systems.
Defence
- India has the world’s fourth-highest defence expenditure since 2022 and has set a target of $6 billion in defence exports annually by 2028-29.
- India enjoys a unique status as a major defence partner of the United States, providing opportunities to procure sensitive defence technologies.
- The Ministry of Defence has set a target of 70% self-sufficiency in arms by 2027, offering huge prospects for players in the industry.
- Defence exports rose 240% in the last five years to $1.9 billion. India now exports defence equipment to more than 85 countries.

Interesting investment opportunities
Aviation
- Demand for maintenance, repair, and operations (MRO) facilities is increasing in India due to consistent growth in the aviation sector.
- The Indian aviation body AAI has launched development projects worth about $2.8 million over the next five years for the expansion and modification of existing terminals, extension and strengthening of existing runways, air navigation services, control towers, etc.
Defence
- Modernisation of the armed forces
- Development of infrastructure
- Defence manufacturing – Designed, developed and manufactured in India is the new method of capital procurement.
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