June 21, 2026

Drone Manufacturing Business in India The Number That Should Make Every MSME Founder Stop Scrolling India relies on almost 100% of its components for drones, such as circuit boards, sensors, motors, and gimbals, from China. This is in a market that is already worth around ₹13,200 crore and growing at a CAGR of more than 20%. As per the ministry of Defence, the defence establishment has been placing procurement orders with startups and MSMEs under iDEX programme worth of ₹2,326 crore. And the government has now made it a point to ban the import of fully-fledged drones, with every drone sold in the country now being assembled in the country. That’s an expenditure agenda worth ₹2,326 crore for procurement of Indian products which are yet to be produced in large numbers. Reflect on that for a while. The demand is guaranteed. The Buyer, in this case the Indian Armed Forces, is the most credit worthy buyer in the Country. But what is lacking is manufacturing capacity on the ground. It is that space that is the opportunity. This is no prediction of the future. Ten months ago, in May, Operation Sindoor was a live battle field exercise that proved the need of indigenous drones for India’s national security. The government’s response was prompt – the spending on drones will be tripled in the next 12-14 months, says Drone Federation of India, which has more than 550 member companies. One of the most real opportunities that are available right now to the first-generation entrepreneurs and MSME founders who have even basic precision assembly capacity. Related Article: Camera Drone Manufacturing: A Comprehensive Business Guide for Entrepreneurs and Industry Leaders The Gap: 80% Imported, Zero Room for Complacency As of early this year, the Directorate General of Civil Aviation (DGCA) has registered 29,501 drones in India. Delhi accounted for 4,882 units, Tamil Nadu 3,689 units, Maharashtra 2,516, Haryana 1,928 and Karnataka 1,928. Delhi led with 4,882 units followed by Tamil Nadu with 3,689, Maharashtra with 2,516, Haryana with 1,928 and Karnataka with 1,928. These are the states where the demand for drone is highest and no coincidence that these states are home to the industrial and defence clusters. The problem is structural. While the government has banned import of fully-knitted drones from (effective from February 2022, per the Directorate General of Foreign Trade), India still has a small registered drone fleet and a projected increase in this number, which is not sufficient to support the country’s domestic production of enough drone components. Propulsion systems, flight controllers, LiDAR sensors and high-resolution cameras continue to be received from Chinese and Taiwanese sources as separate components. The import duty on parts of drones is in between 28% to 35% on HS Code 8806 (Central Board of Indirect Taxes and Customs). It drives up the costs for all Indian assemblers. The dependence is critical for defence purposes. Surveillance drones are required for India’s land border of 15,106 kms and its coastline of 7,516 kms. Currently, the Indian army has drones from Israeli, American and domestic manufacturers, but with the political and strategic momentum going in favor of the post Operation Sindoor efforts, the army would like to have a large number of indigenous supplies. It’s at the component level where the MSME opportunity exists. Precision motor coils, polycarbonate frames, ESCs (electronic speed controllers) and payload enclosures are the components that can be produced in a 2,000/5,000 sq ft plant with an investment of ₹30/60 lakh in machines and equipment that makes news in the finished-drone market. TABLE 1: State-wise Drone Demand, Registered Units & Key Industrial Clusters State Registered Drones Key Demand Sector Industrial Cluster Delhi / NCR 4,882 Surveillance, Logistics Manesar, Noida Electronics Tamil Nadu ~3,200 Agri, Defence, Inspection Chennai Aerospace Corridor Maharashtra ~3,100 Industrial, Film, Agri Pune, Nashik Defence Hub Haryana 3,689 Agri, Border Security Gurugram Tech & MSME Zone Karnataka 2,516 IT-Drone Integration, R&D Bengaluru Aerospace SEZ Telangana 1,928 Agri, Pharma Delivery Hyderabad Drone Corridor Gujarat 1,338 Port, Energy, Industrial Surat, Ahmedabad Mfg Belt Uttar Pradesh ~1,200 Agri, Border Use Lucknow, Kanpur Defence MSME Source: DGCA Digital Sky Platform; Drone Federation of India (dronefederation.in) The Opportunity: Policy Wind, Defence Demand, and ₹2,000 Crore Waiting Indian manufacturers have found a fine but potent entry window at the confluence of three factors. The initial PLI scheme for drones and drone components had an outlay of ₹120 crore for a period of 2025-28 as per the Ministry of Civil Aviation, Press Information Bureau, and has been extended with a 20% incentive on value addition and minimum value addition of 40%. The minimum turnover threshold for MSMEs is as low as ₹20 lakh per annum. It’s really accessible. Second, under the iDEX (Innovations for Defence Excellence) programme, grants are offered under the SPARK programme (and under the ADITI programme for deep-tech) for prototypes up to ₹1.5 crore. More than 400 procurement contracts have been inked with startups & MSMEs. The Defence Ministry has sanctioned orders worth ₹2,400 crore this year with iDEX firms, which is actual tendered value, and not estimates. Third, the rate of GST on drones has been reduced to 5% (from 18–28%). This lowers the tax burden for consumers and makes domestic drones cost competitive with smuggled or grey market drones. DGCA has also enabled BVLOS (Beyond Visual Line of Sight) corridors in Telangana, Ladakh and Andhra Pradesh and has enabled delivery and survey work cases using a commercial drone. In the case of the MSME entrepreneur, it is easy to see that the available entry points are the agricultural spraying drone, the defence-grade surveillance frames, the drone component sub-assemblies (which are available from larger OEMs) and the drone servicing and repair networks. All these need to be different levels of capital and skill. The most cost-effective approach is to build a small-batch drone assembly and component manufacturing facility as outlined in the sections below. Get Detailed Insights from This Book: Handbook on Electric Vehicles Manufacturing TABLE 3: Applicable Government Schemes, Eligibility & Benefit