Suposedly, the 'Arjun' is an entirely indigenous design. It began as a concept laid out by the Combat Vehicles Research and Development Establishment division of the Defence Research and Development Organization in India. It was the result of a Staff Requirement issued by the Indian Army in 1973 - 74 that incorprated the lessons learned during the previous wars with Pakistan in 1965 and 197. It was originally called MBT-80 and was to be introduced into service in the 1980's. The Indian Army subsequently revised the requirement several times and coupled with the difficulties in developing from scratch the infrastructure and technologies to build an MBT resulted in a series of delays.
The original Indian built engine could not generate enough power for the mobility requirement and in the hot environment of the Rajastan desert the engine performance degraded appreciably. Later prototypes were powered by german MTU 838 Ka-501 diesel engine but the installation of this raised the level of the engine deck to a point where the main armament could not depress below 0° when it was over the engine decks. In addition. due to the rising costs. the manufacturer was wanting to charge for future powerplants the search for a another powerplant, preferably Indian-made, was started.
The armament is an Indian-designed 120mm rifled tank gun. The tank gun is capable of firing APFSDS, HESH, HEAT, and HE rounds. The gun tube is made from electro-slag-refined steel, fitted with a fume extractor, and covered by a thermal sleeve. The 'Arjun' is armoured with 'Kanchan' armor. This armor is thought to be a 'composite reinforced fibre armour' similar in aspects to Chobham armour. The tank itself is fabricated from rolled homogenous steel plating to which the 'Kanchan' armor is affixed. The suspension includes the use of hydropneumatics similar to that on other contemporary tanks.
Less than 100 vehicles were built at the Heavy Vehicles Factory at Avadi,which is near Madras. These currently equip a single Indian Army cavalry regiment.
Arjun Prototype
Production Arjun Mk.1
So, it at least uses a German engine, possibly complete powerpack. Perhaps there are some more German compunents used, but it does not appear there is a direct connection with Leopard II