Offset Policy
The rule that makes a foreign defence deal also build an Indian supply chain
Imagine a country agreeing to buy an expensive piece of imported equipment, but attaching one condition to the deal, the foreign seller must reinvest a meaningful share of that contract value back into the buying country, through local jobs, technology transfer or manufacturing. That is precisely the logic behind India's defence offset policy.
Under the offset policy, foreign companies winning sufficiently large Indian defence contracts are required to reinvest a specified percentage of the contract value back into India, typically through local manufacturing, sourcing components from Indian suppliers, technology transfer, or investment in Indian defence research. The explicit intent is to ensure that even purely import driven defence deals leave behind some lasting domestic industrial capability, rather than simply being a one way outflow of money for finished equipment.
Offset obligations have become an important, if sometimes contentious, lever in building India's private defence manufacturing base, since foreign original equipment manufacturers winning large contracts often specifically seek out Indian private companies as offset partners, giving those Indian firms both revenue and valuable technology exposure they might not otherwise access.