Just turn DRDO into a DARPA like agency and let privates slowly start doing most of the heavy lifting.
Always been advocating this. However an additional point. To prevent the private players from becoming another "just assemblers" for foreign JV partners additional safegaurds should be inplace for % of imported contents in the product, availability and sanction proof nature of critical stuff of the product , forex spent as a percentage of total product cost, technology availability of the product with the local JV partner (in case of private parties bidding with foreign JV partners).
Once the minimum quality requirement of the services are met for such products additional points given to bidders who comes up with some serious export plans for such products.
Point is simple- damn care who makes the product , DPSU or private , till the product meets the services timeline, quality and quantity with the right price.
DRDO [ along with other local vendors ]focus only on development of strategic stuff which no one will give us , and once developed the production part goes to the most eligible agency after alignment with government and the services (with certain criteria) [ex. Vikas engine manufactured by Godrej and others.]