India has expended a great deal of energy and resources to set up a vast defense economy to innovate and produce state-of-the-art weapon systems for use by the armed forces. However, the performance of the defense economy has been largely suboptimal, leading to poor self-reliancein arms procurement and heavy dependence on foreign sources for meeting the key defense requirements. An examination of the causes of poor performance exhibits a number of  hortcomings related to India’s both 'hard' and 'soft' innovation capacities. Inefficiency and lack of reforms of the main research and development (R&D) and manufacturing players, meager R&D and procurement budgets, poor management of human resources, lack of strong support from the political leadership, and a weak acquisition system, leave India’s defense innovation in a poor state.