India, which shares borders with nuclear-armed China and Pakistan, is likely to spend $250 billion over the next decade to upgrade its military.
India tests long-range missile from mobile launcher for the first time
It is the world's biggest buyer of defence equipment but Modi is trying to build a defence industrial base in the country to cut overseas purchases.
The test-firing of the missile system, jointly developed by India and Israel, was carried out by warship INS Kolkata, the Ministry of Defence said in a statement.
Defence industry sources told Reuters last year that the value of the Barak 8 project was $1.4 billion. The aerial defence system includes a radar for detection, tracking and missile guidance.
Only a small club of countries including the United States, France, Britain and Israel possess such capability, a Defence Research and Development Organisation spokesperson said.
Ballistic technology: India test-fires nuclear capable missile
Israel is one of India's top three arms suppliers, delivering items such as missiles and unmanned aerial vehicles, but such transactions were for long largely unpublicised because of India's fear of upsetting Arab countries and its own large Muslim population.
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