Germany and India are in advanced discussions over a submarine manufacturing agreement valued at $8 billion or more, a deal that could emerge as India’s largest defence contract to date, according to Bloomberg. The talks are taking place ahead of German Chancellor Friedrich Merz’s first official visit to India next week.

Under the proposed arrangement, Germany’s Thyssenkrupp Marine Systems GmbH is expected to partner with Mazagon Dock Shipbuilders Ltd. to manufacture the submarines in India. The collaboration would mark a significant step in India’s defence manufacturing ambitions, with production carried out domestically.

The proposed agreement is also expected to include the transfer of submarine construction technology, a feature India has not previously secured in comparable defence deals. Such a transfer would strengthen indigenous capabilities in complex naval platforms and support long-term self-reliance objectives.

The submarines under discussion would be equipped with air-independent propulsion systems, which allow vessels to remain submerged for extended periods compared with conventional diesel-electric submarines. This capability is considered particularly relevant for prolonged deployments and patrols across the Indian Ocean region.

At present, the Indian Navy operates around 12 ageing Russian-origin submarines alongside six French-built Scorpène-class submarines. The addition of new-generation vessels with advanced propulsion technology would represent a significant upgrade to the fleet.

The negotiations are taking place against the backdrop of India’s defence policy shift since 2020, under which imports of several major defence platforms have been restricted to encourage local manufacturing by foreign suppliers. Despite these measures, India remains the world’s second-largest importer of defence equipment, with Russia continuing to be its biggest supplier, according to the Stockholm International Peace Research Institute.

If finalised, the submarine deal would signal a shift in India’s naval procurement strategy, combining domestic manufacturing with advanced foreign technology while gradually diversifying its long-term defence sourcing.