India is the third largest economy in the world by Purchasing Power Parity. While the global economic slowdown has forced Governments across the global to pare down their defense spending, India has emerged as the largest importer of defense arms. It faces enormous security challenges and threats like terrorism, low intensity conflict, nuclear weapons as also Left Wing Extremism. In the last budget the outlay increased by 12.4% to USD 38.17 billion. The outlay has a direct relation with the GDP and historically Indian Defense capital spending has averaged around 0.7% of the GDP. With the bottoming out of the Indian economy, defense capex is likely to move higher as the economy picks up as also due to significant pent up ordering. While the opportunity is huge the challenges too are immense. Any foreign corporation intending to grab this opportunity must acclimatize to the Indian business, political & bureaucratic climate. Right kind of hand holding and guidance by a local partner is a must, particularly in the initial stages.