Wings of change: India’s drone ecosystem enters the build era

For years, the Indian sky above bustling cities and sprawling farmlands was largely uncharted territory for advanced drone technology. A nascent industry, hindered by bureaucratic hurdles and heavily reliant on imports, struggled to find its wings.

Today, however, India is not just clearing its airspace—it is orchestrating a bold, multi-faceted strategy to transform itself into a global drone powerhouse. Besides, it is not merely about cutting-edge tech but a profound strategic play in the B2B technology and ICT world, which is poised to redefine how industries operate across the subcontinent and beyond.

Early Constraints and Reliance on Imports

Just a few years ago, India’s drone sector was a paradox. Despite immense potential across agriculture, infrastructure, and defence sectors, it was severely stunted. The restrictive Drone Rules 1.0 imposed a labyrinthine web of approvals, requiring up to 25 forms and 72 types of fees, effectively grounding innovation. This regulatory quagmire created a vacuum eagerly filled by a flood of fully assembled drones from abroad, primarily China.

India, despite its engineering prowess, remained a ‘screwdriver economy’ in this sector. Critical components, such as high-performance sensors, sophisticated flight controllers, microchips, and specialised batteries, were almost exclusively imported. This dependency was not just an economic drain but also posed significant vulnerabilities, particularly in defence, raising alarms about data security and supply chain reliability. The market, at a modest USD 2.22 billion in 2023, reflected a consumption-heavy rather than production-led ecosystem.

Policy Reforms and Rapid Expansion

The turning point arrived in a cascade of policy reforms. The liberalised Drone Rules 2021 drastically simplified procedures, reducing the number of forms to five and the fees to four. This was the initial spark.

Then came the Production-Linked Incentive (PLI) Scheme in September 2021, with a promise of Rs 120 crore incentive for domestic value addition over three years. This was a clear message: innovate and manufacture locally, and the government will back you. The import ban on fully assembled drones in 2022 further solidified this, creating a protected market for burgeoning domestic players.

The latest, and arguably most impactful, piece of this strategic puzzle took effect on 22 September 2025: a landmark GST reform. Previously, commercial drones were subject to an 18% GST, while personal drones were taxed at 28%. The new directive slashes this to a uniform 5% for all commercial drones. In a further boost to national security, military-grade drones, their high-performance batteries, and flight simulators are now exempt from GST.

“The GST reduction is indeed a welcome move and a strong testament to the government’s progressive vision for building India’s drone ecosystem. For us at Garuda Aerospace, this policy change directly enhances affordability for end-users, which in turn drives wider market adoption,” highlighted Agnishwar Jayaprakash, Founder and CEO, Garuda Aerospace.

When combined with the PLI scheme, this signals a holistic ecosystem being nurtured—one that rewards domestic innovation and accelerates manufacturing at scale. “The import ban further strengthens this by creating a level playing field and ensuring that Indian drone companies like ours can confidently invest in R&D, expand production capacity, and generate local employment”, he added.

This was not a piecemeal intervention. Instead, it was a carefully choreographed symphony of policies. The import ban created a captive market, the PLI scheme fuelled domestic manufacturing, and the GST cut was the crucial accelerator, making the final, indigenously manufactured product more affordable. This GST reduction alone could lower commercial drone prices by 10-15%, expanding accessibility for B2B clients across sectors.

Indigenisation Challenges and Dependencies

While the 5% GST on finished drones is a boon for customers, it creates a nuanced challenge for manufacturers: the inverted duty paradox. Most high-tech drone components, still largely imported, carry a higher GST rate, typically 18%.

Ashok Kumar Gupta, Executive Chairman, Optiemus Group, said, “One of the main issues is that when components are imported from foreign countries, the technical dependency is much higher and hence the response time to resolve a technical problem takes longer. This, in turn, may affect the turnaround time for the development of drones and also after-sales service to the end customer.”

The cost of imported components is also higher than that of indigenised components, which is eventually passed on to the final product, making it more expensive. “Although India has come a long way in terms of their technical capabilities and availability of trained manpower, we believe that for certain specialised items, we are still lagging in the investment, technical expertise, and time which is needed to make reliable components,” Gupta explained.

The challenge remains immense. India faces significant dependence, with 60-70% of core drone parts still imported, particularly high-tech sensors, microchips, and propulsion systems. This carries economic and national security implications, particularly with restrictions on Chinese components in sensitive sectors.

Despite these hurdles, India’s engineering talent is on the rise. Some companies are designing and manufacturing custom payloads and robust airframes. Startups are tackling component gaps. Discussions around a PLI 2.0 scheme signal continued government commitment.

DaaS: The Enterprise Growth Engine

The ultimate goal is not merely to build drones, but to deploy them at scale. India is pioneering the Drone-as-a-Service (DaaS) model, in which providers offer technology-as-a-service, significantly lowering entry barriers.

“DaaS has fundamentally changed the game. Instead of buying drones as a capex-heavy gamble, enterprises now buy outcomes: faster inspections, SLA-backed surveillance, verified crop health data, or cycle counts tied directly into ERP systems,” said Vinay MK, CEO of Amber Wings.

“The key beneficiaries are sectors beyond oil and gas, such as surveying, where drones were already used for mapping. Now logistics, solar farms, warehousing, EPC, mining, steel, and agriculture are all engaging with drones, driven by the DaaS model,” he added. Besides, the new Civil Aviation Drone Bill makes this even more relevant. Criminalising non-type-certified operations forces enterprises to pick professional providers who can prove certification, testing, and compliance.

“That weeds out hobbyists and grey market players, and strengthens serious service operators like us. DaaS not only makes drones easier to adopt but also transforms workflows, reduces working capital, and delivers measurable ROI. That is why it is the most powerful driver of market expansion today,” Vinay said.

Maturing Ecosystem, Global Ambitions

India’s drone journey is emerging as a case study in strategic national development in unmanned aerial vehicles (UAVs). From a regulated, import-dependent market, it is transforming into a policy-driven, innovation-led ecosystem aligned with Make in India. The GST cut is a critical component of a larger blueprint that frees capital for indigenisation, improves affordability, and accelerates the Drone-as-a-Service (DaaS) shift.

Challenges such as the inverted duty structure and component self-reliance persist. Yet, the momentum is clear. With market valuations projected to rise from USD 2.22 billion to USD 10 billion by 2035, and domestic manufacturing capabilities potentially reaching USD 23 billion by 2030, India’s UAV and drone players are no longer observers in the global race—they are competing, innovating, and scaling.