India to Launch $234 Million Incentive Scheme to Boost Domestic Drone Industry

India is set to roll out a ₹20 billion ($234 million) incentive programme aimed at strengthening its civil and military drone manufacturing capabilities, three sources told Reuters. The move comes amid growing drone use in conflicts with Pakistan and rising competition from Chinese and Turkish-backed drone technology in the region.

The three-year scheme — led by the civil aviation ministry and supported by the defence ministry — targets domestic production of drones, components, software, counter-drone systems, and related services. It builds on India’s modest ₹1.2 billion drone start-up incentive launched in 2021, which struggled to spur significant growth due to funding and R&D challenges.

India’s push for indigenous drones accelerated after a four-day clash with Pakistan in May, when both sides deployed UAVs, loitering munitions, and kamikaze drones extensively — marking their first large-scale drone conflict. Indian Defence Secretary Rajesh Kumar Singh recently stated:

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“We’ve learned that we need to double down on indigenisation to build a large, effective military drone ecosystem.”

Currently, India largely imports military drones from Israel, though domestic firms have started offering competitive products. However, critical components like motors, sensors, and imaging systems still depend heavily on Chinese suppliers.

The new programme aims to have 40% of key drone components made in India by FY2028, according to two government officials. To encourage local sourcing, additional incentives will be offered to manufacturers who procure parts domestically.

The Small Industries Development Bank of India (SIDBI) is expected to back the scheme by offering low-cost loans for R&D and working capital needs.

An industry source said India already has over 600 drone-related companies, but needs this boost to compete globally and reduce reliance on imports.

Previously, Reuters reported that India could spend up to $470 million over the next two years in a phased investment in UAVs. The upcoming incentive programme marks a significant step toward building a resilient, home-grown drone industry capable of supporting both civilian and military needs.

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