Opinion: HAL’s Partial Fighter Exit Brightens India’s Aerospace Future

India’s nascent aerospace and defense industry took a big step forward in February. It was not just a contract award or a production decision—it was the removal of a longstanding and very big obstacle to the industry’s growth.

First, India announced that the largest defense deal in the country’s history—for 114 Dassault Aviation Rafale fighters—would involve local production by Tata Advanced Systems Ltd. (TASL) and/or Reliance Industries, not Hindustan Aeronautics Ltd. (HAL). Second, the Indian government also announced that its planned next-generation Advanced Medium Combat Aircraft (AMCA) would be competed and that HAL would not be eligible. Instead, the three bidders would be TASL and two consortia, one led by Bharat Forge Ltd. and the other by Larsen & Toubro Ltd.

These announcements are extremely significant. For decades, HAL had almost total control of the Indian combat aircraft market, one of the largest export fighter markets in the world. HAL was the prime contractor on national fighter aircraft; it handled all license production of imported aircraft, and it was the primary beneficiary of offsets from imported aircraft. HAL built and sustained hundreds of Russian and British aircraft in Indian Air Force and Indian Navy service.

The problem is that HAL’s performance has been subpar, at best. Air Chief Marshal Amar Preet Singh, chief of India’s Air Staff, was heard at Aero India 2025 saying that he has “no confidence” in HAL. This frustration is understandable. For more than 40 years, the company has been working on the Light Combat Aircraft, also known as the Tejas. The Tejas is a relatively lightweight and unambitious design, but only a few dozen have been inducted since production model deliveries began in 2016.

The Tejas has been a disaster, but HAL also badly compromised the Indian Air Force fleet plans and confounded hopes for associated work from those contracts. Starting in 2011, negotiations over local production of 156 Rafales for the Indian Air Force (and more for the Indian Navy) broke down because, incredibly, HAL demanded that Dassault guarantee the quality of HAL’s own work.

Dassault, not being crazy, refused to sign that deal and instead tried to get around HAL by working with other Indian partners. But HAL stubbornly maintained its position as a mandatory part of any local production plan. Thus, the Indian Air Force and Navy have been forced to import Rafales in smaller batches to avoid any local work and technology transfer requirements. The Indian services were stuck with an aging fleet, futile hopes for the Tejas and small numbers of imported Rafales with no local industrial benefits.

February’s AMCA and Rafale production developments change all that. India’s military will receive scores of new Rafales, and India’s private sector defense industry will reap the technological and manufacturing benefits from this contract and others like it. These private sector companies will also work on the AMCA, probably in cooperation with Western counterparts that will be eager to work with them. For Western companies, it makes a big difference to cooperate with people who do not demand guarantees for their own work. This fighter work will also give these Indian private sector companies the industrial and technological base they need to compete effectively for more civil aerospace work in world markets.

The AMCA, with a private sector prime contractor, will undoubtedly be more successful than the Tejas. It might even fly before the Tejas program’s 50th birthday.

Meanwhile, HAL, the last unreformed legacy of India’s state-owned defense industry, will be left with the Tejas, upgrades for aging Sukhois and MiGs and little else. HAL will face a choice: Privatize and reform, or just gradually fade into irrelevance.

There are still obstacles in the way of India’s aerospace industry development. HAL is not without its political champions, and they might restore the old, dysfunctional order. But again, India is one of the biggest military export markets in the world and one of the fastest-growing civil markets. It has enormous human resources, too.

With HAL largely out of the way, India can now leverage this buying power and talent to promote the part of its aerospace industry that is capable and competent. The Indian Air Force will also have a clearer path to a newer and more capable combat aircraft fleet.