India's Defence Expenditure: An In-depth Analysis

Introduction

Defence expenditure is a critical aspect of a nation’s sovereignty and security. It reflects the government's commitment to ensuring national defense, modernizing military capabilities, and maintaining regional influence. India, as one of the world’s largest and most populous democracies, has consistently invested in its defense sector to safeguard its territorial integrity and strategic interests.

Over the decades, India's defense expenditure has evolved significantly, influenced by geopolitical tensions, economic growth, technological advancements, and strategic ambitions. As of the 21st century, India ranks among the top five defense spenders globally, underlining the importance the country places on military preparedness.

This article delves deep into India's defense expenditure—its historical trends, allocation patterns, challenges, and future outlook.

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Historical Evolution of India's Defence Spending

Post-Independence Era (1947–1962)

At independence in 1947, India inherited a partitioned and weakened military force. Initially, defense spending was modest, accounting for less than 2% of GDP. The Indian government, led by Prime Minister Jawaharlal Nehru, focused more on socio-economic development than military build-up, subscribing to the principles of non-alignment.

However, the 1962 Sino-Indian War exposed severe weaknesses in India's defense preparedness. Consequently, defense expenditure saw a significant spike post-1962 to rebuild and modernize the armed forces.

War Periods and Military Build-up (1962–1971)

The wars with China (1962) and Pakistan (1965, 1971) were pivotal in pushing India towards greater military investment. The defense budget increased sharply during these years, focusing on expanding the army, acquiring modern equipment, and building indigenous defense capabilities. The 1971 war, which led to the creation of Bangladesh, showcased India's military strength but also highlighted the need for constant investment.

Nuclear Era and Modernization (1974–1998)

India’s first nuclear test in 1974 at Pokhran, known as "Smiling Buddha," introduced a new dimension to defense spending—nuclear deterrence. Defense expenditure increasingly catered to strategic programs, missile development (like the Agni and Prithvi series), and expanding conventional forces.

Following economic liberalization in 1991, there was a cautious approach to defense spending to maintain fiscal discipline. Nevertheless, the 1998 nuclear tests (Pokhran-II) and the subsequent Kargil War (1999) re-emphasized the need for a robust military, resulting in consistent defense budget growth.

21st Century: Strategic Shift and Modernization Drive

Entering the 21st century, India recognized the importance of modernizing its military forces to match global standards. With rising economic strength, India allocated larger budgets for defense acquisitions, indigenization through the "Make in India" initiative, and infrastructure development along borders, especially vis-à-vis China.

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Current Scenario: Defence Budget Overview

Budget Size and Global Ranking

As per the Stockholm International Peace Research Institute (SIPRI), India is the third-largest defense spender globally, after the United States and China. In the Union Budget 2024-25, India allocated approximately ₹6.2 lakh crore (around US$74 billion) towards defense, marking a steady increase from previous years.

This constitutes about 13% of the total central government expenditure and around 2% of India's GDP. Although the percentage of GDP spent on defense has remained relatively stable, the absolute value has grown due to India's expanding economy.

Major Components of Defence Budget

India’s defense budget can broadly be divided into three segments:

1. Revenue Expenditure

   • Salaries, pensions, maintenance, and day-to-day operations.

   • Accounts for over 50% of the defense budget.

2. Capital Expenditure

   • Procurement of new weapons, platforms, military infrastructure, and modernization initiatives.

   • Represents about 30-35% of the total budget.

3. Defence Pensions

   • Given India's large retired military population, pensions form a significant part (around 20%) of the defense outlay.

   • The 'One Rank One Pension' (OROP) scheme further increased this burden.

Allocation by Armed Forces

• Indian Army receives the largest share (around 55–60%).

• Indian Air Force and Navy share the rest, with increasing allocations to the Navy for India's growing maritime ambitions.

• DRDO (Defence Research and Development Organisation), Border Roads Organisation (BRO), and other departments also receive significant funding.

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Key Drivers of Defence Spending

Geopolitical Tensions

India faces complex security challenges:

• China: Border disputes, including the Doklam standoff (2017) and Galwan Valley clashes (2020).

• Pakistan: Long-standing disputes over Kashmir, cross-border terrorism.

• Regional Security: Ensuring stability in the Indian Ocean region, countering China’s influence.

These necessitate high military readiness and modernization.

Technological Advancements

Modern warfare demands investment in:

• Cybersecurity

• Space technology

• Artificial Intelligence (AI)

• Drones and unmanned systems

• Hypersonic missiles

• Next-generation fighter jets and submarines

India’s defense budget increasingly accommodates such cutting-edge domains.

Indigenization and Self-Reliance

Under the "Aatmanirbhar Bharat" (self-reliant India) initiative, the government has emphasized reducing dependence on foreign arms by encouraging domestic production through:

• Defence Public Sector Undertakings (DPSUs)

• Private sector participation

• Foreign direct investment (FDI) liberalization in defense

• Defense corridors in Uttar Pradesh and Tamil Nadu

This push requires significant funding for R&D, manufacturing infrastructure, and technology transfer.

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Challenges in Defence Spending

High Revenue Expenditure

The bulk of India's defense budget is consumed by salaries and pensions, leaving limited resources for modernization. The manpower-intensive nature of the Indian Army particularly strains finances.

Modernization Backlog

Despite substantial budgets, modernization is slow due to:

• Bureaucratic delays

• Complex procurement procedures

• Corruption scandals (e.g., Bofors, AugustaWestland)

Thus, India faces a simultaneous challenge of maintaining a large conventional force while also modernizing it.

Rising Defence Imports

Despite efforts to promote indigenous production, India remains heavily dependent on imports for critical military hardware, making defense procurement costly and sometimes politically sensitive.

Fiscal Constraints

Balancing defense expenditure with social sector spending (healthcare, education, infrastructure) is a perennial challenge. Rising debt levels post-pandemic further complicate budgetary allocations.

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Key Defence Procurement and Modernization Programs

India has embarked on several big-ticket defense acquisitions and projects:

• Rafale Fighter Jets: Acquisition from France to bolster the Indian Air Force.

• S-400 Air Defense System: Purchase from Russia, enhancing air defense capabilities.

• Tejas Fighter Jets: Indigenous light combat aircraft.

• INS Vikrant: India's first indigenous aircraft carrier.

• Arjun Main Battle Tanks: Indigenous tank development.

• Apache and Chinook helicopters: Modernization of air mobility.

• Nuclear Submarines and Ballistic Missile Development: Strengthening strategic deterrence.

Moreover, projects like "Agni Prime," "Pralay," and development of Hypersonic Technology Demonstrators are examples of India's commitment to next-generation warfare.

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Future Outlook

Strategic Shifts

India is likely to pivot towards:

• Greater investment in cyber and space warfare capabilities.

• Strengthening border infrastructure (roads, airstrips) in the Himalayan region.

• Expanding blue-water navy capabilities to project power in the Indian Ocean.

Budgetary Trends

Defense spending will likely maintain a steady upward trajectory in absolute terms, though its percentage of GDP may stay around 2% to 2.5% to maintain fiscal prudence.

Focus areas will include:

• Enhanced private sector participation

• Technological partnerships (e.g., with the US, Israel, France)

• Continued emphasis on indigenization

Challenges Ahead

Balancing modernization, pensions, and revenue expenditure while maintaining combat readiness remains the biggest challenge. India also faces the twin task of countering the rapid modernization of China's military and maintaining strategic deterrence against Pakistan.

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Conclusion

India’s defense expenditure is not merely about buying arms or paying salaries—it’s about securing the nation’s future in a rapidly evolving global order. As India’s economy grows and its strategic interests expand, a robust, modern, and self-reliant military becomes not just desirable but essential.

While there are numerous challenges—fiscal, strategic, and technological—the direction is clear: India is poised to transform from a major regional power to a significant global military player. Sustainable, smart, and strategic investment in defense will be key to achieving this ambition.

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