Historically in the year following a crisis, the defence budget witnesses a jump, whether it be 1962, ‘65, ‘71, Kargil or Sindoor. The reason claimed is to make up deficiencies but more likely the crisis has been a wake-up call for a government which overlooked defence allocations. This year was no different. Ideally the budget should witness a steady growth year-on-year. As a developing country, possessing the world’s largest population, India faces multiple challenges and hence increasing demands from the budget pie.
The government needs to enhance infrastructure, promote industry and cater for social, medical and skilling needs of its population. This makes balancing the budget difficult. The defence budget this year has witnessed an increase of about 15 per cent over the previous year, rising from Rs 6.81 lakh crore to Rs 7.84 lakh crore. It also includes pensions totalling Rs 1.71 lakh crore. The revenue section, earmarked for sustenance of the force, including salaries, is Rs 3.65 lakh crore. The capital expenditure has risen by 22 per cent to Rs 2.19 lakh crore. According to the government, the focus remains on internal sourcing of defence products with a large part of the capital budget earmarked for domestic procurements. The finance minister also mentioned that the b udget caters for modernization of the armed forces with emphasis on AI, robotics and space.
The NIFTY India Defence index dropp e d with the announcement of the budget, indicating that the industry expected higher funding and increased allocation for domestic products. There is no doubt that when compared to challenges faced by India, two nuclear powered adversaries who have combined in a conflict, the budget is less. Further, air power, a critical component of any military power, has been witnessing a drop in capabilities and needs a boost. There are also increasing challenges in the Indian Ocean region, necessitating a more powerful navy.
The armed forces are imbibing technology while restructuring and modernizing to meet future challenges. Hence, funding to support these initiatives are essential. It must be noted that the primary role of the armed forces is not waging war but war avoidance by developing capabilities which deter adversaries. There has been a constant demand that the defence budget should be a minimum of 3 per cent of the GDP. Europe is moving towards 3.5 per cent in the coming years, while the UK spends 4 per cent. Pakistan also spends 5 per cent on defence. The US exceeds 5 per cent. There is a comparison made with the officially declared budget of China which in 2025 was USD 245 billion, though in reality far more. India’s current defence budget is USD 94 billion.
It is incorrect to compare China’s defence budget with ours. China is competing against the US backed by its alliance partners in the South and East China Seas. It has territorial disputes with most of its neighbours, while claiming Taiwan. India has no offensive intent though territorial disputes exist. It needs strong armed forces to deter misadventures, implying a different set of capabilities which the armed forces are developing. There are op tions for the government to enhance the budget. The first is to announce that allocations would reach 3 per cent over the next few years, increasing steadily year-on-year. The second is implementing the roll-on budget concept for the capital section, wherein amount unspent is carried forward to the next year.
The third is reducing bureaucratic delays in approvals. Delays are responsible for reduction in air and naval capabilities. In addition, each nation has differing priorities for its financial pie. In India’s case it is unknown where defence lies in the government’s priorities. Are funds allocated to other sectors and then defence or vice-versa? There is no doubt that as the economy grows so will the defence budget. Meanwhile, the armed forces need to maximize every penny of the budget in a judicious manner with minimum wastage. For this, joint planning and procurement is essential.
Simultaneously, capabilities can never be created overnight. It takes time. Equipment once inducted, depending on the platform, remains in service for decades, hence needs careful consideration. Detailed trials are essential but once equipment is identified for induction, delays in procurement must be avoided as they impact cost. The revenue and pension share of the budget may witness a drop in the future as the Agniveer scheme gains ground. In the meanwhile, avoiding wasteful expenditure, including delays in approvals, unwarranted court cases related to disability and pensions etc. should be stopped.
There is also a limit to capital expenditure which can be expended by our armed forces in a year. The domestic industry is unable to meet defence requirements in the promised time. The air chief and Chief of Defence Staff have highlighted their frustration on this subject on multiple platforms but to no avail. The MoD needs to deal with defaulting companies firmly. India largely imports its defence equipment from Russia, the US, Israel, and France. There have been delays from the US which are well documented and have been raised with their government, Russia and Israel are involved in their own ongoing conflicts, slowing down exports and at times increasing costs without notice. Joint production with global giants involving multiple rounds of discussions add to time and cost. This makes a roll-on budget essential.
Another problem area is low expenditure in defence R and D. While there has been an increase in allocation to the DRDO, the quantum available for R and D remains roughly 5-6 per cent of the defence budget as compared to 10-15 per cent of leading global powers. Supporting the private sector in R and D and handholding is equally essential. The government has established multiple academiaDRDO-industry centres of excellence; however, a lot more in civil-military fusion needs to be done.
These institutes also need to be financially supported. At the national level the government has earmarked approximately Rs 67,000 crore for R and D. This is just about 0.66 per cent of GDP, which is extremely low. With low levels of R and D funding, the best option for enhancing technology levels is joint ventures between the private sector and global giants. The government is considering joint production of the SU57 which is an ideal option. Such ventures must be with the private sector. We can still exploit the current budget provided the armed forces and bureaucracy work hand in glove in cutting down time and wasteful expenditure. The question is whether they are willing.
(The writer is a retired Major-General of the Indian Army.)