Defence Dispatch - January 2026

This is the first edition of Defence Dispatch, Ikigai Law’s monthly newsletter on India’s defence sector. We are starting this now since we believe defence has moved from being a specialist topic to being a headline driver of policy, budgets, industrial strategy and cross-border dealmaking and India is increasingly a part of that story. 

This first edition focuses on a set of developments that illustrate how that change is playing out in practice, including the proposed easing of foreign investment rules in defence manufacturing, the EU-India Security and Defence Partnership, and related policy and institutional moves shaping India’s defence ecosystem. Before turning to these developments in detail, we set out the broader thesis that will frame Defence Dispatch going forward. 

The post Second World War security bargain that shaped the Western world is fraying, and the consequences will be felt in procurement, partnerships and defence production far beyond the West. For decades, the United States played the central role in underwriting the security architecture of Europe through NATO, including the expectation of collective defence under Article 5. It established the principle that an armed attack against one NATO member would be treated as an attack against all, creating a collective security guarantee that deterred large-scale conflict. This led to relative civilizational peace across much of Western Europe in the decades that followed. 

In practice, while this obligation was shared across the alliance, the credibility of that guarantee rested largely on U.S. military power, deployments, and spending. That arrangement helped Europe keep defence budgets relatively lower for long periods, while states expanded spending and political attention on domestic priorities - commonly observed as the “peace dividend”. This role was not altruistic. Acting as the guarantor of Western security also served clear American interests: it entrenched U.S. military dominance, reinforced political influence across Europe, and supported a stable and prosperous trading bloc that became one of America’s most important economic partners. 

The world now looks less like that bargain and more like an era of forced rearmament. Global military spending rose to a record USD 2.718 trillion in 2024 marking a 9.4% jump in a single year, the steepest annual rise recorded by the Stockholm International Peace Research Institute since at least the late 1980s and the global military burden rose to 2.5% of world GDP.  

At the same time, Washington has been clearer in tone and in action that it will not automatically bankroll the security of partners who do not carry more of the load. In January, following Operation Absolute Resolve that resulted in the detention of Venezuelan President Nicolás Maduro by U.S. forces, the U.S. Defence Secretary Pete Hegseth publicly framed American reach in maximal terms: “America can project our will anywhere, anytime”. In the same month, U.S. statements asserting Greenland’s strategic importance to American defence raised the prospect of greater U.S. control over the territory. This prompted immediate public responses from Greenland and Denmark, before the United States subsequently softened its position. The episode added to wider European unease about the reliability and tone of U.S. security guarantees, including for NATO allies. Put bluntly, Europe is being told to spend more on defence, and recent events are making it harder for European states to assume that U.S. protection is unconditional anymore. Taken together, these developments point toward a decade in which Europe is likely to arm itself more deliberately, with higher defence spending and a sharper focus on readiness and capability. 

India enters this moment from a different starting point. Since independence, it has pursued a policy of non-alignment and strategic autonomy as a matter of defence doctrine. It continues to not rely on U.S. or other external security guarantees. Its defence planning has instead been shaped around its two adversarial neighbours. Yet it operates within the same international system now being reshaped by higher defence spending across regions and more frequent use of military force as a tool of state policy.  

The four-day India-Pakistan war in May 2025, including India’s retaliatory strikes under Operation Sindoor following the April Pahalgam attack, brought questions of deterrence, readiness and escalation management back into the foreground. Against that backdrop, there have been calls to raise defence spending, accelerate procurement timelines, and strengthen domestic capability. 

A second driver sits alongside budgets and geopolitics. AI and autonomous weapon systems are changing warfare; cyber and space have become routine elements of conflict; and quantum is increasingly discussed as part of mainstream defence policy. For India, these shifts are no longer abstract. They have the potential to shape procurement priorities, domestic manufacturing ambitions, and the terms on which foreign technology partnerships are negotiated. Globally, these shifts matter not just for militaries, but for industrial partners and capital as they change what governments buy, what firms can credibly build, and what kinds of collaborations become strategically sensitive. 

This is what Defence Dispatch will track each month: how global shifts are changing defence spending and posture. We will examine what this means for India’s defence policy, manufacturing and defence-relevant emerging technologies. 

Each edition of Defence Dispatch follows a consistent three-section structure, outlined below: 

In Focus: 

Proposed easing of foreign investment rules in defence manufacturing  

In January, the Government of India signalled a material shift in its approach to foreign investment in defence manufacturing. According to Reuters, the government is preparing to raise the foreign direct investment cap under the automatic route to 74% for defence companies that already hold manufacturing licences. The government is also considering removing a separate condition that applies when foreign ownership exceeds 74%. Under current policy, such investments are permitted only where the investor can demonstrate that the transaction will result in access to “modern technology”, a standard that has been criticised for its lack of clarity and predictable application. Together, these changes would allow foreign firms to take majority stakes in Indian defence ventures without prior government approval, reducing deal uncertainty in a sector that has struggled to attract meaningful foreign capital. Despite a steady expansion of joint ventures and strategic partnerships with defence firms from the United States, France, Israel and Russia, foreign equity inflows into India’s defence sector have remained negligible, amounting to just USD 26.5 million out of USD 765 billion in cumulative FDI received by India between 2000 and September 2025.  The move is also consistent with the broader direction set out in the opening section. As defence spending rises and states move to tighten readiness, governments are leaning more heavily on faster production, deeper industrial capacity, and more dependable supply chains. For India, easing investment constraints is one way of trying to expand domestic manufacturing capacity at pace, rather than treating the defence industrial base as something that can grow only through incremental public spending.  

EU-India Security and Defence Partnership 

On 27 January, India and the European Union signed a Security and Defence Partnership on the margins of the India-EU Summit, establishing the first overarching framework for defence and security cooperation between India and the EU as a bloc. Signed by External Affairs Minister S. Jaishankar and EU High Representative Kaja Kallas, the partnership outlines cooperation across key security domains, including maritime, cyber, space, and defence-industry collaboration. It also establishes a regular EU-India Security and Defence Dialogue to support this engagement. The agreement builds on existing engagement, including joint maritime activities with EU naval missions such as EUNAVFOR Atalanta and Aspides, and sits alongside parallel moves to launch negotiations on an EU-India Security of Information Agreement, a prerequisite for deeper industrial and technology cooperation. As discussed in the opening section of this newsletter, European governments are now under pressure to raise defence spending as long-standing assumptions about external security guarantees weaken. The timing of this agreement is therefore notable. European defence spending has risen sharply since Russia’s invasion of Ukraine, yet industrial capacity constraints, long delivery timelines and supply-chain bottlenecks have become important concerns in Brussels. This agreement reflects how that pressure is translating into concrete institutional choices: alongside higher budgets, Europe is moving to broaden defence partnerships in ways that support readiness, industrial cooperation and sustained output. Against this backdrop, India is treating this partnership as a pathway for closer defence-industrial collaboration, including potential participation by Indian firms in EU defence initiatives linked to the EU’s broader rearmament and readiness programmes. While the framework is explicitly non-binding and stops short of procurement commitments, it reflects a convergence of interests: Europe’s need to scale defence output and diversify supply chains, and India’s effort to position itself as a credible manufacturing and industrial partner in a more contested global security environment. 

Defence Roundup: 

Defence Time Machine: 

Long before modern missiles, the Kingdom of Mysore (under Hyder Ali and Tipu Sultan in the 1700s) developed the world's first iron-cased rockets. Unlike European paper rockets, these had iron tubes that allowed for higher pressure and ranges of up to 2 km. They were so effective that the British captured them and reverse-engineered them into the "Congreve Rocket."