When does a defence manufacturer need an industrial licence?

No. DPIIT's Press Note 2 (2019) clarified that manufacturing parts or accessories in the defence sector needs no industrial or arms licence unless the specific part is named in Press Note 1's Annexure I or II. Most components and sub-assemblies fall outside the licensed list; only the specifically named systems and items require a licence before production starts.

An Industries (Development and Regulation) Act licence is valid for 15 years, extendable by 3 more years, giving 18 years in total within which commercial production must begin. Arms Act licences have no fixed validity period, but the licensed facility has to be established within 7 years, extendable by a further 3. Both clocks start running from the date the licence is granted.

DPIIT, under the Ministry of Commerce and Industry, issues Industries (Development and Regulation) Act licences and, by delegation from the Ministry of Home Affairs, Arms Act licences for weapons of 12.7 mm calibre and above and allied equipment; smaller-calibre arms licensing stays with the Ministry of Home Affairs. Applications for either are filed online through DPIIT's licensing portal.

No. DPIIT grants industrial and Arms Act licences only to Indian entities: companies incorporated under the Companies Act, sole proprietorships and partnerships. Foreign investment into such an Indian company is a separate matter, governed by the FDI policy and FEMA, with up to 74 percent permitted through the automatic route and more through the government route in specific cases.

No. DPIIT states that SME units also need a licence for an item genuinely listed in Press Note 1 (2019); size is not an exemption once an item is on the list. The real exemption is for parts and accessories not specifically named in the annexures, which applies to manufacturers of any size, not to MSMEs alone.

A Ministry of Defence backgrounder dated 20 November 2025 recorded 788 industrial licences issued to 462 companies for defence manufacturing, alongside roughly 16,000 MSMEs working in the wider defence supply chain. Most of those MSMEs make parts and accessories that fall outside the licensed list altogether, which is why the licence count is far smaller than the supply chain itself.