Rupal Kalebere and Sujeet Samaddar
India’s defence budget for FY 2025-26 has been a subject of analysis and debate, especially in the backdrop of global economic shifts, geopolitical uncertainties, and the nation’s increasing focus on self-reliance in defense production. With ₹6.81 lakh crore (~$81.1 billion) allocated to the Ministry of Defence (MoD), the budget has seen a 9.6% increase from the previous year, surpassing the growth of both GDP (6.5%) and the Union Budget (5.08%). As a part of Central Government Expenditure the budgetary allocation is ~ 13 %. Therefore, the question arises —does this budget truly align with India’s long-term strategic goals?
Overall Allocation & GDP Ratio
As mentioned earlier, the Indian Defence Budget for FY 2025-26 stands at ₹6.81 lakh crore (~$81.1 billion), which is approximately 1.91% of the nation’s GDP. However, when pension-related expenditures are excluded, the effective defense spending is reduced to 1.39% of GDP. This allocation is a critical indicator of India’s strategic priorities and financial commitments to national security.
Comparison with Traditional Benchmarks
Historically, India’s defense expenditure had hovered around 2% of GDP (excluding defence pensions) after the 1962 debacle, a figure widely considered by the strategic community as the minimum benchmark for maintaining adequate military preparedness. However, the current budget allocation of ~ 1.39% of GDP – for meeting both force maintenance and force modernization – falls below this notional threshold, signaling a moderate and restrained approach to defense spending . While the 9.6% increase in the defense budget surpasses both GDP growth (6.5%) and the overall Union Budget growth (5.08%), the share of GDP allocated to defense has remained moribund at this level and no substantial rise is seen in the budgetary allocation. It is, of course, possible that the strategic assessment is that national security threats and challenges are lower than before and diplomatic negotiations and concessions may dominate in conflict resolution dialogues. It is also possible that big ticket “cases” for defence modernisation such as the P75I submarines, fighter aircraft for the IN and IAF, Loght Tanks for the Army, etc, are not “ripe” for contracting in the current fiscal and hence not budgeted.
Global Context and Comparisons
In 2022, global military spending was 2.2% of the world’s gross domestic product (GDP). This was the highest level of military spending ever recorded by the Stockholm International Peace Research Institute (SIPRI). When compared with global trends, India’s defense spending, though fourth largest in the world, as a percentage of GDP is relatively modest as these numbers suggest:-
- United States: Allocates around 3.5% of its GDP to defense, making it the highest global spender in absolute terms (~$886 billion in 2023).
- China: Officially reports 1.7% of GDP (~$224 billion in 2023), though many analysts believe actual defense spending is significantly higher.
- Russia: Spends approximately 4.1% of GDP (~$110 billion), reflecting its military-heavy strategy amid geopolitical conflicts.
- Other notable Spenders. Defence spending by Israel hovers at 5.8% of GDP, Saudi Arabia at 7.1% and United Kingdom at ~ 2.4%.
Despite having the third-largest military in the world, India’s allocation remains conservative compared to other major powers, highlighting its careful balancing act between security and economic development.
Rising Strategic Demands
India faces a complex and evolving security environment, with challenges ranging from border tensions with China, Pakistan and Bangladesh to maritime security concerns in the Indo-Pacific. The instability in Myanmar may also flow in the sensitive North Eastern States of India. Maldives, Nepal and Sri Lanka need to be also engaged so they remain favourablyinclined towards India. There is also rising exposure and commensurate expenditure in training and exercises with friendly foreign militaries. The need for modernization, force restructuring, and indigenous defense manufacturing is more critical than ever.
Though the allocation towards the Ministry of Defence is the largest across all ministries and accounts for ~ 13% of the total expenditure of the central government it has reduced dramatically from about ~ 17.8% in 2016-17. With an allocation of only 1.91% of GDP and less than 13% of Central Government Expenditure, there could be concerns whether this budget is sufficient to meet the growing demands of “keeping the peace” , winning technology-driven warfare, robust and resilient strategic deterrence, bolster the image as the net security provider in the region and allow for continuous military modernization.
Fiscal Constraints and Trade-offs
Broader economic considerations, including public welfare programs, infrastructure development, and fiscal consolidation efforts clearly heavily influence the government’s approach to maintaining a moderate defense budget. While this prudent “financing” strategy ensures macroeconomic stability, it also raises “security” concerns about whether India’s armed forces are receiving adequate resources to achieve self-reliance and strategic dominance and the extent to which force maintenance for legacy equipment and force modernisation through induction of new equipment and refurbishment of vintage equipment is progressing to assure a robust deterrence capability across all its frontiers in the hills, jungles, plains, deserts and not to forget the oceans.
(To be continued)