"Manufacturing cannot be done with borrowed technology. We really got to have the drive for innovation," Ms Sitharaman said at an event where scientists of the Defence Research and Development Organisation (DRDO) attended.
"India being the largest procurer of defence equipment, the emphasis on indigenisation has to be reiterated. This is exactly what has happened from 2014," she said, referring to the government's "Make in India" programme, which seeks to boost manufacturing in India.
DRDO chairman S Christopher said they have got an engine for the unmanned combat air vehicle Ghatak and is working to install DRDO-made sensors and weapons in warships.
This month also marks the 20th anniversary of the 1998 Pokhran nuclear tests.
Ms Sitharaman said the nuclear tests were carried out under "global watch" and restricted conditions, yet the world did not get a hint about the tests. She congratulated the DRDO scientists for successfully conducting the test.
Following the Pokhran tests, several countries had imposed sanctions on India. India had also faced international sanctions after its first nuclear test in 1974.
DRDO scientists were also awarded at the event on Monday. NITI Aayog member and former scientific advisor to defence minister VK Saraswat was honoured with the Lifetime Achievement Award.
The Pokhran-II nuclear weapons tests, code-named Operation Shakti, are considered different from the 1974 Pokhran-I exercise, code-named Smiling Buddha, because back then India conducted one detonation that it designated a "peaceful nuclear explosion".
With inputs from PTI
Get the latest election news, live updates and election schedule for Lok Sabha Elections 2019 on ndtv.com/elections. Like us on Facebook or follow us on Twitter and Instagram for updates from each of the 543 parliamentary seats for the 2019 Indian general elections.