MoD Clears $40 billion Historic Defence Deals

By Gulshan Luthra and R Chandrakanth

• To Overhaul the Acquisition and Modernisation Process
• Acquire 114 Rafales with 50 % Local Content
• Largest Military Modernisation Initiatives in India’s history
• Incentives for Indigenous design and Manufacturing

New Delhi. In what is widely regarded as one of the largest military modernisation initiatives in its history, India has cleared defence acquisition proposals worth ₹3.60 lakh crore ($ 40b). This signals a decisive shift toward strengthening operational readiness while accelerating domestic defence manufacturing.

The approvals by the Defence Acquisition Council (DAC) chaired by Defence Minister Rajnath Singh represent a sweeping overhaul of India’s military capabilities across Sea, Land, Air and Missiles (SLAM) domains, mostly anchored by the procurement and domestic production of 114 Rafale fighter jets.

There should also be other, additional, programmes in the coming months and years, as India’s acquisition and modernisation suffered a paralysis post-VP Singh’s allegation over the 1986 deal for Bofors howitzers from Sweden, which he falsely claimed “fired backwards and killed Indian Army’s own troops.” Because of the viciousness in the modernisation process he created, and due to MoD’s complicated acquisition rules mandating oversight by civil intelligence agencies like Central Bureau of Investigation (CBI) and Enforcement Directorate (ED), it’s been difficult for the three Services to keep pace with the fast advancing technologies from Land to Space.

In any case, it’s not easy to get the biggies to share their technologies, and that is true for most countries from the US to Britain, Russia, Germany and France.

Nonetheless, the timing of the clearance, ahead of French President Emmanuel Macron’s visit to India, underscored the strategic importance of defence cooperation in bilateral relations.

Macron paid a hugely warm visit to India from February 17 to 19 during which his focus was on strengthening friendship and bilateral ties with India. He launched the India-France Year of Innovation, jointly inaugurated the AI Impact Summit with Prime Minister Modi, worked out the framework for Rafale supplies and joint production in India of some EW systems.

The planned acquisitions are to fill operational capability gaps and help build a long-term, self-reliant defence industrial ecosystem. Besides the Rafale Fighter jets, they cover Boeing’s P8-I anti-submarine platforms, Missiles, Armoured Vehicles and their upgrades, Surveillance Systems, and Power Generation equipment for Ships and Submarines.

Rafale Deal Stipulates 50 percent Indigenisation

At the core of the $ 40b acquisition programme is India’s decision to procure 114 Rafale multi-role fighter aircraft from Dassault Aviation, with direct induction of 18 jets and progressive manufacture of 96 by the private sector in India, namely by the Tata and Mukesh Ambani groups.

According to Mr Rajesh Kumar Singh, India’s Defence Secretary, the localisation component is a key pillar of the programme. “For the first time, Rafale aircraft will be manufactured outside France with significant levels of localisation. “We are seeking a minimum of 40 to 50%. I think they have already offered something close to 40%, but our intent is to take it to as close to 50-plus as possible, and we are confident that we can negotiate that.”

“This is Make in India, backed by a Government-to-Government (G2G) agreement, with no intermediaries and full transparency in the project itself. It also provides full authority to integrate Indian weapons and Indian systems.

Mr RK Singh observed: This level of integration is strategically significant, allowing India to deploy domestically developed missiles, critical Electronic Warfare (EW) systems, and Avionics to enhance operational autonomy and reducing reliance on foreign suppliers.

Shoring Up Squadron Strength, and EW Capabilities

IAF has a sanctioned strength of 42 Squadrons, or 756  combat Aircraft. But their number is less than 30, and the aircraft inventory just about 540. Each Squadron is composed of 18 aircraft.

There are only two Squadrons with modern Fighters, that is, with the 36 Rafales India acquired in 2020 under emergency requirement.

Indian Air Force’s Su 30MKI heavy, and capable  of carrying big missiles like the BrahMos. Howsoever the technologically advanced 4.5 gen Rafales, described in their programme as Medium Role Combat Aircraft (MRCAs), would be IAF’s main strength.

Notably, the Indian Navy also has 26 Shipboard Rafale-M (for Marine) on order. And more are likely.

The IAF and Navy Rafales could jointly dominate the strategic areas from the Seas to the Mountains, and neutralise threats emanating from other countries even from faraway sky stations.

According to Air Marshal Anil Chopra, who was among the first pilots to bring in Mirage 2000s from France to India in 1985, the French technology is the most reliable, and some of the weapons for Rafales and Mirages would be common. That by itself is a Force Multiplier, with IAF sharing inventory not only on its two platforms but of course, also with the Indian Navy.

Air Warfare has always been about the Range and Depth of an aircraft and its weapon systems.

Critically, and strategically now, it’s more about newer onboard technologies that provide unprecedented Electronic Warfare (EW) dominance to kill an enemy from far away, thanks to enabling satellite connectivity. Network Centric Warfare capabilities are being built across the three Services.

Deep Strike capability is what the IAF, Navy and Army want, and the $ 40b programme is much about it.

The aim is to acquire much technology from partner countries, and then speed up development and producton for the lost time.

Systems on the list include Air-Ship Based High Altitude Pseudo Satellites (AS-HAPS), and plenty of equipment even to upgrade the existing inventory.

Even the Indian Coast Guard (ICG) would receive advanced electro-optical and infrared surveillance systems and more HAL-built Dornier aircraft for increased maritime domain awareness and coastal security.

Procurement Reforms Under DAP 2026

Complementing the acquisition programme is the proposed overhaul of India’s defence procurement framework under the Defence Acquisition Procedure (DAP) 2026.

The reforms aim to streamline procurement processes, accelerate acquisition timelines, and increase indigenous content requirements.

Key changes include raising indigenous content mandates to 60% in certain categories, introduction of long-term acquisition planning, enabling faster procurement processes for emerging technologies, and providing incentives for indigenous design and manufacturing.

The revised framework also introduces technology readiness level-based procurement, allowing faster adoption of advanced technologies, and enhancement of industry participation through assured orders and development partnerships.

Recalling the 2007 MMRCA Programme

IAF had floated a tender for 126 Medium Multi Role Combat Aircraft (MMRCAs) in 2007, and of the six aircraft in competition, Rafale and Eurofighter were shortlisted.

Rafale was selected on the basis of lower costs in 2012, but it refused to partner with HAL, as per the mandated clause in the tender, saying the state-run Indian company would be unable to meet the strict production timelines as laid down by the tender. There was a penalty clause in the tender for Dassault Rafale for any delayed deliveries. (The work culture in France is about speed and precision; in the Indian Public Sector Units (PSUs), these requirements are not respected, it said).

This time, for the 114 Rafales, the French company’s partnership is with the Tatas and the Ambanis. Both are India’s big international players in the Private sector.