The DPM 2025 signifies a fundamental change in how India plans to develop, maintain, and expand its defence ecosystem. It moves away from the 2009 manual not merely by updating documents but by clearly positioning procurement as a key driver of industrial capability, technological progress, and strategic independence.
What makes DPM 2025 historically significant is not just that it simplifies procedures, although it does, but that it intentionally shifts the focus of defence supply chains towards domestic innovation, MSME participation, and long-term industrial continuity.
However, the manual also reveals the next major structural shortcoming: India has a procurement system that lacks a corresponding defence financing framework. Without this missing component, indigenisation will progress with prototypes but stall in production. The manual is therefore best viewed as a necessary but not yet sufficient tool in India’s path toward sovereign defence capability.
Why DPM 2025 Marks a Structural Moment
For decades, India’s defence procurement ecosystem has been built on a contradictory premise: that world-class capacity will develop even when domestic industry must bear the risk without state-supported financial continuity.
DPM 2025 transforms the psychology of defence procurement by recognizing that innovation must be continuous, and manufacturing cannot be seasonal. It redefines procurement not as a simple purchase, but as a function that builds national capabilities.
This shift was overdue. India remains the world’s second-largest arms importer, accounting for 11–13% of global imports over the past decade. Meanwhile, less than 20% of the private sector’s defence manufacturing capacity is consistently utilized, mainly because procurement cycles are unpredictable and order streams uncertain. For the first time, a procurement manual indirectly but clearly recognizes that industry cannot scale if it is asked to operate without long-term assurance.
The Legacy Problem: What DPM 2009 Could Not Deliver
DPM 2009 was a procedural manual, not an industrial strategy. It was designed for transactional acquisition, not capability development. Three structural failures limited its effectiveness.
First, centralisation hindered readiness. Field formations could not act even for mission-critical consumables without higher approvals. A 2019 audit found average delays of 7–9 months for basic revenue procurements.
Second, innovation was seen as a liability. Startups and MSMEs were expected to compete with DPSUs on established performance metrics even during development.
Third, procurement operated independently of industrial viability. Despite more than 3,400 defence-licensed MSMEs, fewer than 15% moved from prototype to induction. A system lacking continuity could only generate sporadic innovation.
What DPM 2025 Changes at a Structural Level
DPM 2025 shifts from “procurement as purchasing” to “procurement as national capability-building.” Its reforms are not superficial; they are fundamental.
Decentralisation transfers power to Competent Financial Authorities (CFAs) in forward formations, reducing latency.
Indigenisation is embedded, not aspirational. The new chapter formalizes industry-academic collaboration.
Assured orders for 5+5 years turn procurement into forecastable demand, forming the foundation of manufacturing viability.
Tech-enabled transparency fosters trust and reduces perceived entry barriers, especially for first-generation suppliers.
Indigenisation: From Slogan to Architecture
Unlike older frameworks that announced indigenisation, DPM 2025 implements it. The most important change is that MSMEs and startups are now involved in procurement before tendering, rather than afterwards. The user (Armed Forces) is no longer a distant evaluator but a technical partner. Innovation risk is acknowledged as part of national resilience, not a commercial flaw.
But this evolution also reveals a deeper truth: procurement architecture alone cannot support industrial transformation unless financing architecture evolves in parallel.
Where Startups and MSMEs Fit Now
DPM 2025 grants MSMEs earlier entry into the supply chain, maintains continuity through order assurance, and provides breathing room with relaxed liquidated damages norms during development. This shifts their role from “contestant” to “partner.”
It also establishes the basis for moving defence participation away from DPSU control and into diversified, competitive supply chains.
This is vital because 80% of future defense innovation will come from subsystems, electronics, propulsion subassemblies, precision manufacturing, robotics, materials engineering, and software-defined platforms domains mainly led by SMEs, not state-run giants.
However, DPM 2025 still assumes that private capital alone can finance early manufacturing scale-up. This is unrealistic in a sector where repayment cycles are dependent on the state, not the market.
Thus begins the crucial second half of this analysis: procurement reform without defense financing architecture will limit industrial growth at the prototype maturity stage.
The Missing Layer: Financing
While DPM 2025 supports demand continuity, it does not support capital continuity. The global defence powers that India seeks to emulate — Israel, France, the US, and South Korea — operate through sovereign-backed defence financing frameworks. In India, however, capital risk remains solely private, while strategic risk is entirely sovereign. This imbalance reduces the survival prospects of promising domestic innovators.
Case in point: iDEX has awarded over 430 innovation contracts, but fewer than 30 have reached serial induction.
Defense corridors have signed ₹20,000 crore worth of MoUs, but only 18% have led to production-scale utilization. Startups and MSMEs are not lacking in innovation; they lack risk-tolerant capital that connects prototype success with production.
Simply put, DPM 2025 creates the runway, but without financing architecture, aircraft cannot take off.
Testing, Certification, and the Valley of Death
The gap between “trial success” and “final absorption” is India’s quietest but most critical structural bottleneck. Certification cycles take 30–42 months on average; startup survival cycles last 18–24 months. The difference is both mathematical and ultimately fatal.
Even when startup solutions are validated, financial exhaustion happens before induction. DPM 2025 implicitly assumes absorption will follow once procurement is smoother; in practice, it needs guaranteed post-validation working capital, which no policy currently provides.
Unless testing and certification are aligned with financing certainty, India will keep producing world-class prototypes and companies that go commercially extinct.
Fragmentation: The Four Parallel Indigenisation Tracks
India today has multiple policy tools promoting indigenisation, but they function as separate pathways rather than a single streamlined industrial process. The Defence Acquisition Procedure (DAP 2020) oversees capital procurement, the new Defence Procurement Manual (DPM 2025) manages revenue procurement, iDEX encourages innovation at early-stage development, and SRIJAN replaces imported components with domestic manufacturing.
Each framework operates within its own silo and optimizes one part of the ecosystem, yet there is no unified integration stack that connects these lanes into a continuous cradle-to-deployment pipeline. As a result, DPM addresses the consumption and sustainment aspects, while DAP focuses on modernization, but neither covers the financing or absorption aspects. This disjointed policy approach is why India often achieves “policy success without industrial success” — the frameworks convey intent but do not produce cumulative outcomes.
G2G Reform: India’s Emerging Industrial Diplomacy
One of the most strategically important reforms in DPM 2025 is the elimination of the mandatory DPSU No Objection Certificate (NOC) for Government-to-Government procurements. This simple change triggers three major shifts.
First, it challenges the historical assumption that DPSUs must be the main beneficiary of G2G transactions.
Second, it structurally facilitates co-development partnerships between Indian private sector players and foreign OEMs, thereby promoting technology transfer beyond licensed assembly.
Third, it advances India’s industrial diplomacy by positioning private players as legitimate actors within the global supply chain. The results of this repositioning are already visible: India’s defence exports have risen from ₹686 crore in FY 2013-14 to ₹21,083 crore in FY 2023-24, a thirty-fold increase in under a decade. However, export momentum cannot be maintained without amortisation, and amortisation depends on long-term domestic order books. By providing procurement certainty, DPM 2025 begins addressing this essential requirement, signaling India’s shift from a buyer of defence capacity to a co-producer and ultimately a strategic innovator.
Institutional Resistance: Where the Friction Will Surface
The success of DPM 2025 depends not only on the strength of its provisions but also on the willingness of the institutional ecosystem to let those provisions unfold. The first obstacle will come from financial bureaucracy, which has internalized risk aversion as a survival instinct for decades.
Even with decentralised powers, the tendency of “avoidance over accountability” may reemerge, hindering the intended agility of procurement decisions.
The second source of resistance will come from legacy players in the public sector, especially DPSUs, which have traditionally held a gatekeeping-like monopoly over defence orders. By opening competition and removing NOC-based privileges, DPM 2025 diminishes its control over the pipeline, a change they are unlikely to accept quietly.
The third resistance node will be the testing and certification ecosystem, where procedural opacity has long translated into institutional power. Faster validation means losing control, and losing control means losing leverage. In each of these cases, resistance will not be procedural; it will be incentive-based. The reform challenges entrenched advantages, and wherever advantage is disrupted, inertia will surface.
What Must Happen Next: The Strategic Roadmap Forward
To ensure that the structural promise of DPM 2025 translates into industrial transformation, India must now build the second layer of reform—one that complements procurement logic with capability logic.
The first priority is establishing a Sovereign Defence Financing Corporation (DFC), because procurement assurance without financing assurance is only halfway to reform. Order certainty must result in bankable capital, or MSMEs and startups will keep failing in the “valley of post-prototype insolvency.”
The second imperative is a unified national testing and certification system that facilitates concurrent trials instead of sequential bottlenecks. Unless validation timelines are standardized, predictable, and digitally accountable, innovation will stay stuck between proof-of-concept and adoption.
The third and final requirement is a unified vertical indigenisation stack that integrates DPM (revenue), DAP (capital), iDEX (innovation), and SRIJAN (substitution) into a single cradle-to-induction pathway.
Currently, India has four separate tracks of indigenisation but lacks a cohesive core that connects them. These three reforms financing, validation, and vertical integration—serve as the bridge between policy potential and national capability. DPM 2025 begins the reconfiguration; these second-order reforms will complete it.
India 2047: The Strategic End-State
By 2047, India must transition from a defense manufacturer to a defense innovator. This shift requires sovereign funding, sovereign capabilities, and sovereign intellectual property. Procurement reform begins this process; financing reform completes it. Without proper financing, India will remain an assembler. With it, India can become a designer.
Conclusion
DPM 2025 is the most strategically significant procurement reform in India since the liberalisation of the private defence sector. It ensures continuity, decentralisation, and transparency. However, it cannot yet achieve full sovereignty. The next step must establish a defence financing framework that aligns with procurement ambitions. Once this is in place, India will no longer indigenise out of necessity—it will do so because it can.
About the author
Lt Col Manoj K Channan (Retd) served in the Indian Army, Armoured Corps, 65 Armoured Regiment, 27 August 83- 07 April 2007. Operational experience in the Indian Army includes Sri Lanka – OP PAWAN, Nagaland and Manipur – OP HIFAZAT, and Bhalra - Bhaderwah, District Doda Jammu and Kashmir, including setting up of a counter-insurgency school – OP RAKSHAK. He regularly contributes to Defence and Security issues in the Financial Express online, Defence and Strategy, Fauji India Magazine and Salute Magazine.
*Views are personal.