• With a budget outlay of ₹6.2 lakh crore, India’s defence innovation ecosystem has expanded beyond Defence Public Sector Undertakings (DPSUs), creating formal pathways for MSMEs to participate in design, development, and testing through government-backed platforms.

• MSMEs do not need to build complete defence systems; focusing on specific layers such as electronics, software, cybersecurity, testing, or precision manufacturing enables sustainable participation. 

• Programs such as Innovations for Defence Excellence (iDEX), Technology Development Fund (TDF), and defence–academia collaborations connect MSMEs directly with defence users, define problem statements, and provide funding and validation support. 

• Strong documentation, early prototypes, security readiness, and clarity on intellectual property are critical for progressing through defence R&D programs. 

• MSMEs that combine government grants, academic partnerships, and formal financing while scaling in phases are better positioned to manage risk and build lasting roles in defence R&D.

India’s defence spending continues to rise as the government places greater emphasis on developing indigenous capabilities. In the Union Budget for FY 2025–26, the defence allocation crossed ₹6.2 lakh crore, with a growing share directed toward domestic procurement, R&D, and innovation-led development, as a majority of capital procurement is now reserved for Indian industry¹. As this reflects a clear policy shift away from import dependence, it also shows how defence technologies are being developed.

The nation’s defence innovation model is moving away from procurement to creation. A recent example of this approach is the collaboration between the Indian Air Force, through one of its specialised training and research institutes, and IIT Madras. Under this collaboration, IIT Madras researchers are working closely with Air Force technical teams to jointly design and develop advanced communication systems for military operations. The effort focuses on indigenous system design, testing, and validation in India, ensuring that communication technologies align with real operational requirements while reducing dependence on imported solutions.

This approach creates structured entry points for MSMEs beyond traditional defence supply roles. Defence R&D in India is no longer limited to Defence Public Sector Undertakings (DPSUs) or large system integrators. MSMEs, along with academic institutions and startups, are now active participants in formal innovation frameworks supported by the government. Dedicated platforms define operational problems, provide funding support, and enable testing and validation in collaboration with defence users. This ecosystem encourages faster innovation cycles, lowers development risk, and supports the development of domestic capabilities across critical technology areas, including communications systems.  

Relevance of Defence Communication Systems for MSMEs 

Modern military operations depend on secure, real-time, and resilient communication networks. These systems support command, coordination, and situational awareness across complex operational environments. From a development perspective, defence communication systems are modular and involve multiple layers, including hardware, embedded software, signal processing, cybersecurity, testing, and ruggedised manufacturing. MSMEs can contribute specialised components or subsystems without owning or integrating the full system. This significantly lowers entry barriers when compared to legacy defence manufacturing programs, which often required large-scale production capacity and long procurement cycles from the outset. 

MSMEs’ Role in Defence Communication Projects 

Defence communication systems require multiple layers of development, allowing MSMEs to participate in focused roles based on technical strengths. Common areas of participation include electronic hardware and module design, embedded systems and firmware development, signal processing and communication software, cybersecurity and encryption components, testing and certification support, and precision manufacturing of sub-assemblies. 

By specialising in specific layers, MSMEs can build long-term relevance within defence programs. However, converting technical capability into actual defence R&D participation requires access to structured platforms that connect industry with defence users, define development problems, and provide funding and testing support. These include: 

Key Platforms Enabling MSME Participation 

Innovations for Defence Excellence (iDEX) 
iDEX connects defence forces with MSMEs and startups through clearly defined problem statements. Selected firms receive grant funding to develop prototypes or proof-of-concept solutions and work directly with defence users during development. 

Technology Development Fund (TDF) 
The Technology Development Fund supports indigenous defence technology development by funding design, development, and testing stages. MSMEs often participate under TDF in collaboration with academic or research institutions. 

Defence–Academia Collaboration Models 
Academic institutions act as research and testing anchors. MSMEs participate as technology contributors or manufacturing partners, operating within defined intellectual property and commercialisation frameworks. 

While these collaboration models create the structure for MSME participation, successful entry into defence R&D depends on how effectively businesses navigate these frameworks in practice. A clear, step-by-step approach helps MSMEs convert capability and intent into active project involvement. 

Guide for MSMEs: How to Enter Defence R&D Programs 

The following steps outline how MSMEs can systematically engage with defence innovation platforms, academic partners, and development programs. 

1. Identify alignment with defence problem statements or research calls 
   MSMEs should study problem statements issued through defence innovation platforms and assess how their technical capabilities match defined operational or engineering requirements.

2. Register on official innovation and defence procurement portals 
   Registration on government innovation and defence procurement portals is essential to access opportunities, submit proposals, and participate in evaluations.

3. Prepare technical documentation and prior project credentials 
   Well-documented technical notes, execution records, and prior project summaries improve credibility during shortlisting and technical assessment.

4. Develop small prototypes or demonstrators where feasible 
   Even limited prototypes or proof-of-concept models help defence and academic partners assess feasibility before committing to larger development efforts.

5. Engage with academic partners for joint submissions and validation 
   Academic collaborations provide research depth, access to testing infrastructure, and stronger acceptance in co-development and R&D programs. 

Once MSMEs establish these partnerships and enter the development pipeline, the next critical requirement is access to timely and appropriate funding to sustain R&D activity through long development cycles.

Funding and Support Available to MSMEs 

Grant funding under iDEX and TDF reduces early-stage R&D risk for MSMEs by covering design, development, and testing costs. Academic incubation centres further support this process by providing access to laboratories, testing facilities, and expert guidance without heavy capital investment. As projects progress from prototypes to trials or limited production, funding needs also evolve, making structured formal financing important for capacity expansion and working capital support. 

However, funding and technical capability alone are not sufficient in defence R&D. Participation also requires MSMEs to operate within strict security, compliance, and intellectual property frameworks that are unique to the defence sector. 

Compliance, Security, and IP Considerations 

Defence R&D projects involve higher security and data protection requirements. MSMEs must be prepared for background verification, controlled information access, and adherence to security protocols. Intellectual property ownership and licensing are governed by project-specific agreements, particularly in joint development scenarios. Establishing clarity on commercial rights, licensing, and usage terms early helps avoid disputes and delays as projects move closer to deployment. 

When funding readiness, compliance discipline, and technical capability come together, MSMEs are better positioned to think beyond individual projects and adopt a more integrated approach to defence R&D participation.

Integrated Strategy for MSMEs in Defence R&D 

MSMEs should use government innovation platforms to access defence problem statements while partnering with academic institutions for research depth and credibility. Focusing on niche technical strengths rather than end-to-end systems reduces execution risk and improves repeat participation. Phased investment from prototype to limited production, combined with long-term engagement with defence users, enables sustainable entry into defence R&D ecosystems. 

Challenges, Risks, and Mitigation 
Even with a structured strategy, defence R&D remains a demanding environment. MSMEs must be aware of the key risks involved and plan proactively to mitigate them. 

Long development and approval timelines 
MSMEs should plan defence R&D projects in phases, with conservative scaling and hiring assumptions, to keep cash flows manageable during extended testing cycles. 

Complex compliance and documentation requirements 
Creating dedicated internal processes for documentation, audits, and security compliance early helps prevent delays during trials and evaluations. 

Policy and procurement framework changes 
Regular tracking of official defence, Ministry of Defence, and innovation-platform notifications allows MSMEs to adjust timelines and eligibility strategies proactively. 

Capital constraints during development 
A structured funding approach combining government R&D grants, academic partnerships, and formal financing reduces pressure on working capital during long development phases. 

The IAF–IIT Madras collaboration reflects a broader shift in how India approaches defence technology development. R&D is becoming more collaborative, modular, and accessible to specialised private firms. For MSMEs, this creates a viable pathway into the defence sector as technology contributors rather than low-margin suppliers. Firms that invest in capability depth, compliance readiness, and long-term institutional partnerships are best positioned to participate meaningfully in India’s evolving defence R&D ecosystem.