India's ongoing efforts to modernize its air force and enhance its combat capabilities amid persistent border tensions with China and Pakistan have put Dassault Aviation and Lockheed Martin shares in focus. The Indian Air Force (IAF) faces a critical need to bolster its fighter squadron strength, aiming for 60 squadrons by 2047, translating to approximately 1,080-1,200 fighter aircraft. Currently, the IAF operates around 31 fighter squadrons, significantly below its sanctioned strength of 42, a level deemed necessary to counter threats effectively.

Several acquisition programs and strategic decisions are underway to address this shortfall. One significant development is the potential procurement of additional Rafale fighter jets from France. In April 2025, reports indicated that the IAF was preparing to acquire 40 more Rafales through a government-to-government agreement, which would bring the total Rafale fleet to 76 aircraft. This move is seen as a strategic necessity, offering "speed, guaranteed delivery, and continuity" compared to the more prolonged and competitive bidding process of the Multi-Role Fighter Aircraft (MRFA) program. Leveraging existing logistical and training infrastructure already in place for the current Rafale fleet streamlines maintenance and operations. In April 2025, India also signed a ₹63,000 crore deal with France for 26 Rafale-Marine jets designed to operate from aircraft carriers.

The MRFA program, which aims to acquire 114 multi-role combat aircraft, remains a key focus. Several major manufacturers are competing for this contract, including Lockheed Martin, Boeing, Russia's United Aircraft Corporation, France's Dassault Aviation, Sweden's Saab, and the Eurofighter consortium. Lockheed Martin is offering its F-21, an India-specific variant of the F-16 fighter, with plans to manufacture the aircraft in India in partnership with the TATA Group. The F-21 integrates advanced avionics inspired by fifth-generation platforms and boasts 40% more air-to-air weapon-carrying capability than earlier F-16s.

Adding another layer to the mix, the United States is formally offering Lockheed Martin's F-35A Lightning II stealth fighters to India. This offer, structured as a government-to-government Foreign Military Sales (FMS) agreement, promises early deliveries potentially starting as early as late 2027, bypassing the MRFA program. The proposed deal includes an "Adir-type configuration" tailored for India, incorporating specific software and indigenous Identification Friend or Foe (IFF) systems, similar to Israel's F-35I variant.

Russia has also made a significant move by offering its Su-57E stealth fighter jet with full access to its source code. This offer aims to secure Russia's influence in India's defense market and counter growing U.S.-India military ties. For India, this deal represents a pivotal opportunity to bolster its air capabilities amid rising regional tensions, particularly with China and Pakistan.

These acquisitions and proposals come at a time when India faces significant regional security challenges. The 2020 border clashes with China in Ladakh exposed vulnerabilities in India's military preparedness, particularly in high-altitude environments. China's rapid expansion of its air capabilities, including the deployment of J-20 fighters near Indian borders, and Pakistan's acquisition of Chinese-made J-10C fighters have intensified concerns about a two-front threat.

The Indian Air Force is also focused on indigenous production and technological innovation to achieve self-reliance in defense. The Advanced Medium Combat Aircraft (AMCA) project aims to develop a fifth-generation stealth multirole fighter, with the first flight expected around 2028 and induction by 2035. This project highlights India's "Atmanirbharta" pursuit of furthering its own advanced defense industry.

Dassault Aviation is also planning to establish a production facility for Rafale fighter jet fuselages in India, along with Maintenance, Repair, and Overhaul (MRO) facilities for the aircraft's engines, sensors, and weapons. This initiative, formalized as part of a €7 billion deal signed in April 2025 for 26 Rafale-Marine fighters, marks a significant step toward India's vision of self-reliance under the "Make in India" initiative.