Few ideas in Indian defence resonate more than Atmanirbharta, and the Advanced Medium Combat Aircraft—India’s planned fifth-generation stealth fighter—is emerging as its boldest symbol. But aspiration alone does not put aircraft into squadrons.
The Advanced Medium Combat Aircraft (AMCA) is a fiscal test as much as a technological leap. Timelines and budgets, not slogans, will decide its fate.
The concern is hardly trivial. India has long spoken of self-reliance, yet delays have repeatedly necessitated stopgap imports, including Jaguars, Mirages, Su-30MKIs, MiG-29Ks, and Rafales. Unless India addresses its structural weaknesses—Hindustan Aeronautics Limited’s (HAL) monopoly, the hesitant role of the private sector, and a budgetary model skewed toward manpower-heavy land forces—AMCA risks becoming the next in that line.
The real test of Atmanirbharta, therefore, lies in whether India can build not just an industrial ecosystem but a fiscal ecosystem that can carry fighter aircraft plans from the drawing boards to operational squadrons.
Ambition vs costs
The Aeronautical Development Agency (ADA), under the Defence Research & Development Organisation (DRDO), is leading the AMCA design. The plan is straightforward on paper: build five flying prototypes and one structural test specimen, conduct flight testing through the late 2020s, transition to series production by the mid-2030s, and induct seven squadrons (126 jets) into the IAF through the 2040s.
The financials are daunting. The Ministry of Defence (MoD) had last year sanctioned upwards of ₹15,000 crore ($1.8 billion) for AMCA’s design & prototype development. It has approved a proposal worth about ₹61,000 crore ($7.2 billion) to co-develop a next-generation 120 kN fighter jet engine with France’s Safran.
The most substantial outlay will occur during series production, estimated to be in the range of ₹1.2–1.5 lakh crore ($14.5–18.1 billion), depending on the number of aircraft eventually ordered and the pace of production. This expenditure would have to be met from the Indian Air Force’s capital acquisition budget over the production cycle.
DRDO and the MoD fund R&D, but the IAF must buy from its own capital budget, a choke point that distorts fiscal balance. Spiral or block-wise development works only if Technology Review Levels (TRL), milestones, and funding discipline are respected. The Dhruv ALH and LCA Mk1 demonstrate the danger: scarce budgets were allocated to fixes rather than capability, leaving readiness weak. Unless AMCA breaks this cycle, it risks draining funds while squadrons stay short.
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Design and production monopolies
The Government of India appears to have learned from past missteps. It no longer seems to want to rely solely on HAL. The AMCA project has brought Tata, L&T, Bharat Forge, and Adani into play, marking the first genuine attempt to break HAL’s production monopoly and the fiscal lock-in associated with inducting half-ready products.
India is now also reviewing HAL’s future. With an order backlog of over ₹2.7 lakh crore, the government has launched a consultancy-driven restructuring plan that could split HAL into specialised units for fixed-wing aircraft, helicopters, and MRO (maintenance, repair & overhaul).
Earlier, proposals to unbundle HAL had failed due to a lack of scale, but today’s surge in orders appears to make restructuring viable. The current consultancy-driven plan is the most serious step in decades toward ending the PSU monopoly and opening space for genuine private competition in programmes such as AMCA, Tejas, and future airframes.
Design, however, remains the bigger vulnerability. Unlike America’s Next Generation Air Dominance (NGAD) programme, which used competing demonstrators, India relies solely on ADA. This monopoly risks locking scarce budgets into delays with no fallback design house. India can mitigate risks through joint IAF–Navy design bureaus, competitive design cells, and oversight that extends beyond the MoD to the Ministries of Finance, industry, and the National Security Council Secretariat (NSCS).
In its current form, AMCA is a hybrid: monopolised in design but contested in manufacture. India must manage the risks of the first and seize the opportunities of the second if the project is to mature into frontline squadrons.
Building an integrated industrial base
Unbundling HAL into specialised units may finally break India’s Public Sector Undertaking (PSU) monopoly, but Atmanirbharta requires more. India’s private conglomerates, including Tata, Reliance, Adani, L&T, and Bharat Forge, have the potential for significant growth, but they remain siloed.
By contrast, Japan’s post-World War II Keiretsu and Korea’s Chaebols established webs of interlinked firms, tied together by cross-shareholdings, bank financing, and long-term state contracts. These networks created scale, spread risk, and sustained industrial depth even under export bans.
The lesson is clear: combat airpower rarely emerges from a single firm. China’s AVIC (Aviation Industry Corporation of China), Germany’s Hausbank system, and the US military–industrial complex (unmatched in its ability to mobilise capital) all show that fighters are delivered by industrial–financial ecosystems. For a programme as complex as the AMCA, India must move beyond isolated vendors.
A hybrid Indian approach could take shape through a coordinated framework, drawing on Keiretsu-style integration and anchored in an empowered National Defence Industrial Board (NDIB) with representation from defence, finance, and industry. Within such a structure, SBI could provide credit and liquidity, LIC could act as a long-term source of funds through defence bonds or structured investments, and private equity could scale vendors.
Sovereign funds would still anchor the aircraft and engine programmes, but private capital would finance infrastructure, tooling, and tiered suppliers. Together, this ecosystem would deliver the scale, resilience, and fiscal discipline needed for a fifth-generation fighter programme.
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International comparisons
Models vary widely. Japan’s MoD spreads its work across Keiretsu firms under the Acquisition Technology & Logistics Agency (ATLA), which was established in 2015. China centralises under the state-owned AVIC, formed in 2008 by merging AVIC I and AVIC II. Europe pools costs through the multinational Future Combat Air System (FCAS) and the Global Combat Air Programme (GCAP).
The United States leverages multinational funding, scale, and parallel demonstrators, such as the F-35 Joint Strike Fighter and the NGAD programme, which was awarded to Boeing in 2025 and is now designated the F-47. South Korea collaborates with Lockheed Martin on the KF-21 Boramae fighter, utilising sovereign funding.
India alone persists with a fragmented model—HAL, DRDO, ADA, Tata, L&T, Adani, BEL, Data Patterns, among others, where all operate separately. Unlike Japan’s checks, China’s scale, Europe’s pooling, or America’s parallelism, India’s approach concentrates risk without spreading cost, making fiscal discipline as vital as technology.
The funding crunch
Unlike Japan’s Keiretsu, India cannot rely on diversified conglomerates to sustain defence R&D. The AMCA cannot realistically be financed through equity, bonds, or public–private partnerships for the aircraft itself. With only the Indian Air Force as buyer, no export certainty (unlike European joint programmes), and little incentive for private investors to risk billions without assured contracts, private capital will not substitute for sovereign funding.
Private capital, however, can play a critical supporting role. Tata, L&T, Adani, and Bharat Forge can mobilise funds for infrastructure and tooling, including new plants and test facilities. Smaller Tier-2 and Tier-3 vendors in composites, avionics, and machining can expand their capacity through debt or equity financing.
Firms like Data Patterns, with dual-use applications, can utilise IPOs to finance avionics and stealth technologies. In all cases, repayment flows from MoD contracts, easing the state’s upfront burden even though the aircraft itself must remain sovereign-funded.
By the mid-2030s, when AMCA is expected to enter production, the IAF will need an extra ₹10,000-12,000 crore ($1.2–1.45 billion) annually for 10 to 15 years. This acquisition could compete with funds for Tejas Mk2 orders, a possible MRFA (such as the Rafale), and other priorities, including AWACS, tankers, and UAVs.
The defence budget already skews heavily toward the Army, which accounts for 55 per cent, with a significant portion allocated to pay and pensions. The IAF and Navy capital heads are more modernisation-focused but smaller in absolute terms. Unless the budget grows faster, the IAF faces a zero-sum choice: fund AMCA or fund imports. Each year AMCA slips, the temptation grows to fill the gap with foreign fighters.
Fiscal reform—direction vs delivery
There is progress toward fiscal reform in India’s defence sector. Procurement processes have modernised, the private sector has expanded its role, and proposals for a permanent defence capital fund signal ambition for lasting change. The Union Budget 2025 raised capital allocations to a historic high, with capital spending rising both in absolute terms and as a share of the defence budget.
Yet fundamental reform remains incomplete. Budget structures remain skewed, standing modernisation funds have yet to materialise, and manpower-heavy expenditure continues to outweigh capital priorities. The direction is right and aligns with the call for a genuine “fiscal ecosystem” to sustain indigenous capability. However, as of 2025, implementation remains incremental, and policymakers have not yet finalised key fiscal reforms.
By late 2025, India may narrow the MRFA tender to a Rafale F4 deal with France. The Defence Acquisition Council may clear the deal by October, and the MoD may sign the contract in 2026. The ₹2 lakh crore ($24 billion) Rafale line directly overlaps with AMCA’s fiscal necessities. Without budget expansion or rebalancing, Rafales will crowd out AMCA. The IAF thus faces a trade-off: Rafale offers near-term certainty and industrial spin-offs, while AMCA promises long-term Atmanirbharta and a technological leap.
Neither can advance at full pace without serious fiscal reform.
Consolidating fighters and beyond
Similarly, pushing ahead with AMCA and TEDBF (Twin Engine Deck-Based Fighter) separately would duplicate costs and talent without adding proportionate capability. Consolidating them into one fighter family would pool R&D, cut costs, expand production, and strengthen exports, provided the IAF and Navy rise above parochialism. But consolidation should not stop at manned fighters alone.
Worldwide trends point to mixed forces where a stealth fighter directs loyal wingmen as decoys, sensors, or shooters; AMCA as the rathasārathi (charioteer) of the air battle, much like a warrior guiding horses to extend reach and manoeuvre. Carriers equipped with the Electromagnetic Aircraft Launch System (EMALS) and Advanced Arrestor Gear (AAG) enhance this ecosystem, enabling the launch of heavier stealth aircraft and long-endurance UAVs for ISR, strike, and refuelling.
In fiscal terms, AMCA, naval variants, loyal wingmen, and EMALS carriers must be treated not as separate platforms but as a single national project. Only by aligning budgets to this integrated vision can India ensure its investments deliver lasting airpower.
Toward a hybrid Indian model
India cannot replicate China’s AVIC model or Japan’s Keiretsu system wholesale. But it can craft a hybrid:
- Sovereign funding for core aircraft and engine development.
- Private capital for infrastructure, tooling, and vendor capacity.
- Export clearance and multinational tie-ups to sustain the AMCA Mk2 and beyond.
- Institutional consolidation through a National Combat Aircraft Corporation (NCAC), or another forward-looking entity, that pools HAL and private partners under one structure. Such a programme will need sovereign backing, routed through SBI, LIC, or a dedicated defence finance corporation, to combine scale with financial discipline.
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Rise of multinational fighter programmes
While multinational programmes are preferred as the norm, India, by contrast, is carrying the full AMCA burden on its own. Without exports or partners, it shoulders costs heavier than what even ‘richer’ nations attempt. That is precisely why Europe, Japan, and even the UK have turned to multinational models: pooling budgets, spreading risk, and locking in exports through shared orders.
The global trend underscores a simple truth: no single nation, however wealthy, can easily afford the spiralling costs of fifth or sixth-generation combat aircraft. For India, persisting with a go-it-alone model magnifies both the fiscal challenge and the strategic risks.
Conclusion—a test beyond technology
AMCA is as much a fiscal test as a technological one. Sovereign funding must be the anchor, but competition, private capital, and multinational partnerships are also essential. Budgets must shift from manpower-heavy land forces to air and maritime power.
The IAF and Navy must consolidate TEDBF and AMCA into a single family and integrate carriers, EMALS, and unmanned wingmen as a unified portfolio. Otherwise, imports will crowd out AMCA, as Rafale once did when Tejas slipped.
With reform, India can join the small club of nations that design and produce fifth-generation fighter aircraft; a club currently comprising only the US, Russia, and China, with Europe and Japan still on the path. If India disciplines budgets and aligns private capital with national leadership, AMCA can prove that Atmanirbharta is capable of moving from slogan to squadrons. As Kautilya reminded in the Arthashastra, military strength ultimately rests on the strength of the treasury.
The author is a former Flag Officer Naval Aviation, Chief of Staff at the integrated HQ Andaman and Nicobar Command, and Chief Instructor (Navy) at DSSC Wellington. He tweets @sudhirpillai__
Views are personal.
(Edited by Saptak Datta)