Defence In The Age Of AI: Is India’s Moment Here?

In June 2025, somewhere in the mountains in some northern part of India, a machine gun scanned the empty range with cameras and sensors and locked onto a target. No human command or involvement. The gun aimed, and fired at the dummy target and hit the mark. 

This was a real Indian Army trial of a gun manufactured by Indian company BSS. It was also a glimpse into a future where decisions once made by soldiers will be increasingly handled by algorithms. 

India’s defence tech startups are not watching from the sidelines. They’re building the systems that could define the next era of national security. 

According to Inc42’s India’s Defence Tech Startup Ecosystem Report 2025, the global AI military market is worth $16 Bn in 2025 and will more than double to $35 Bn by 2030, growing at 17% CAGR. The drivers are clear, intensifying geopolitical tensions, urgent modernisation needs, and the proven performance of AI systems in conflicts from Ukraine to Gaza.

Access Free Report

In this global race, India is the world’s fifth-largest military spender at $86 Bn in 2024, alongside the US, China, Russia, and Germany. And it’s moving fast to bring AI into the core of its defence strategy.

As per Inc42 data, by 2030, India’s AI defence market alone is projected to hit $2.5 Bn, up from $0.7 Bn in 2025, about 28% CAGR, far outpacing the global average.

Where The Money Will Go

Globally, AI defence spending is shifting toward platforms that think and act for themselves. Autonomous systems, including drone swarms, loitering munitions, and unmanned tanks, are set to jump from $1.9 Bn in 2025 (12% of the market) to $11 Bn in 2030 (30%).

ISR (intelligence, surveillance, reconnaissance), currently the largest segment at $5.1 Bn, will still be critical but is projected to hold a smaller 26% share by 2030 as autonomy takes centre stage. 

Other fast-growing areas include cybersecurity and information operations (32% CAGR).

India mirrors this global pattern. ISR will remain the country’s largest AI defence segment, but autonomous and semi-autonomous systems will grow the fastest at 35% CAGR, followed by cyber. 

Within autonomy, drone swarms, autonomous air defence, and AI-enabled naval systems are set to be major revenue drivers.

High AI Adoption And Counting

As per Inc42 data, in India’s defence startup ecosystem, AI is already deeply embedded. 89% of defence tech startups have integrated AI into their products, together attracting $386 Mn in funding.

Applications range from edge AI on drones for real-time navigation to generative AI powering adaptive military training simulations. The new Wargame Research and Development Centre (WARDEC) in New Delhi, a collaboration between the Army Training Command and Rashtriya Raksha University, will be India’s first AI-driven simulation training hub.

Further, the scale of AI’s role became clear during Operation Sindoor, a live demo of edge AI-enabled ISR, autonomous targeting, and precision engagement. Systems like DRDO’s Abhyas autonomous aerial target drone, which navigates without constant ground control, show why reducing communications latency can be a tactical gamechanger.

And while the government systems were the heart of the operation, private players like ideaForge which develops AI-powered UAVs for reconnaissance and surveillance, also aided the government at the same level. 

Also, companies like Big Bang Boom Solutions, which focusses on AI combat drones and unmanned tanks, Tonbo Imaging that creates AI-driven ISR platforms, AjnaLens, which builds AI-powered mixed reality for training, and GalaxEye, that produces AI-based multi-sensor satellites for real-time strategic intelligence are also helping government at some front or other.

India’s Edge In AI Defence Startups

According to Inc42, Indian defence tech startups have raised $432 Mn so far, with 70% ($307 Mn) of that since 2024. Drones and anti-drone systems dominate, claiming 71% or $305 Mn of total funding, and nearly all now use AI.

Funding is also flowing into AI-specific defence solutions such as AI-powered autonomous swarms and loitering munitions, AI-enabled kinetic interceptors for anti-drone warfare, AI imaging systems for border surveillance, AI-driven nano drones for tactical reconnaissance, and AI-powered unmanned maritime vessels for coastal security.

Inc42’s India’s Defence Tech Startup Ecosystem Report 2025 position India is a “Challenger”,  high spending, rapidly advancing AI capabilities.

India’s strengths include a large, well-funded military modernisation plan with AI as a named priority, strong private-sector innovation especially in drones, ISR, and simulation, and a policy environment, like FDI liberalisation, iDEX, TDF, and DPEPP, that encourages startup participation.

However, challenges like scaling manufacturing to meet military-grade needs, advancing deep-tech R&D in propulsion, quantum sensing, and large-platform autonomy, and competing with global primes in system integration are still major bottlenecks.

(Edited by Nikhil Subramaniam)