Path for the development of the Second generation of Arjun Mk-2 has been cleared recently by the Ministry of Defence and funding allocated , while the Army has ordered more  124  Arjun Mk-1 to keep the production line in Avadi busy till the Arjun Mk-2 will start rolling out from 2013-14 onwards . DRDO rather than starting all over again the Arjun MK-2 will have the same design of Arjun MK-1, but major changes are planned for the new generation variant of Arjun Tank to keep up with the new technological changes which are been  incorporated in the MBT’s world over .
Arjun MK-2 will have Battle Field Management System (BFMS) which will enable the tank to get feed from UAV‘s and Helicopters, which then enable the Arjun mk-2 tank crew much aware of their surroundings and better understanding of the battle zone, this will lead to improvement in coordinating with other Friendly tanks in the zone and also avoid Friendly kills, it will also give information regarding enemy tank movement along with their troops and help navigate terrain in the battle zone.
Self-diagnostic system (SDS) will also be added to Arjun Mk-2 which is like a health monitoring system. it will not only  tell the tank crew if it is having any problem but also point out the trouble area , it is also important when Tank has taken multiple hits from different position and from different ammunition after a self-diagnose Tank crew will know exact damage inflicted on the Tank .
Arjun Mk-2 will get a new efficient 1500bhp engine which has been in development by DRDO in India its self, they are reports that a Indian Private industry is also working with DRDO on the Engine development, currently Arjun MK-1 is powered by German supplied 1400bhp engine which is quite old in design and technical parameters but still a powerful and respected engine in the world.
NERA (non-explosive reactive armor) will be added to Arjun Mk-2 this will give the tank additional protection against anti-tank munitions, unlike ERA, NERA will enable tank to take multiple hits anti-tank munitions, but also increase the weight of Arjun MK-2 to 60 tons from its current weight (Arjun MK-1) of 58 tons.
It is much likely that Arjun Mk-2 will also spot Air-conditioning system for the crew, which will be powered from an APU which will draw its power from the Main engine of the Tank; this will enable the tank crew to operate in higher temperature of desert heat without any discomfort to the tank crew, Arjun MK-1 already has hardened electronics that function perfectly even in the Rajasthan summer without requiring any Air-conditioning system.
More changes will take place in Arjun Mk-2, above mentioned are mostly likely changes which will take place in the new variant.