European Defence Industry Programme's (EDIP) Introduces 35% Foreign Component Limit: India's Export Ambitions Face "Buy European" Barrier
SDG 16: Peace, Justice and Strong Institutions | SDG 9: Industry, Innovation, and Infrastructure
Institutions: Ministry of Defence | Ministry of Commerce & Industry
The European Parliament has approved the first-ever European Defence Industry Programme (EDIP), a landmark regulation designed to transform European defense manufacturing from “improvisation” to “organization”. The legislation aims to strengthen the European defence technological and industrial base and is centered on the “Buy European” principle to boost joint European defence procurement and achieve greater EU sovereignty.
The EDIP program runs until 2027 with a budget of €1.5 billion ($1.7 billion) from the EU budget. A total of €300 million is earmarked specifically for the Ukraine Support Instrument (USI) to help modernize Ukraine’s defense industry and integrate it with the European defense sector.
The “Buy European” principle is a core rule of the EDIP designed to reduce the EU’s dangerous reliance on non-European imports for decades. For a defense product to secure EDIP funding, the cost of its components originating from non-associated third countries (like the US or India) cannot exceed 35% of the estimated total cost of components. This rule incentivizes European production, strengthens the industrial base, and is seen as essential for achieving European sovereignty.
The programme establishes a legal framework for European defence projects of common interest that must involve at least four member states, with Ukraine being eligible to participate. The EDIP is part of a structural, long-term strategic approach to industrial readiness, bridging the gap between short-term emergency measures (like the Act in Support of Ammunition Production - ASAP) and a sustained defense strategy.
Policy Relevance
The introduction of a rigid “Buy European” principle (the 35% foreign component cap) marks a significant policy shift that directly threatens India’s defense export goals and manufacturing supply chain integration. As India pursues its own ‘Make in India’ defense strategy, the EDIP creates a new barrier to entry for Indian components, subsystems, and finished products into the highly lucrative European market. The Ministry of Defence and the Ministry of Commerce must analyze the impact of this new restriction to safeguard export growth, particularly for India’s private sector defense MSMEs.
Relevant Question for Policy Stakeholders: How should the Ministry of Defence respond to the EDIP’s “Buy European” policy, specifically by negotiating a strategic partnership or increasing domestic value addition to ensure Indian defense exports do not fall foul of the new 35% non-EU component cap?
Follow the full news here: European Parliament greenlights first-ever European Defence Industry Programme