Despite security threats, India’s defense budget remains static

Beset by security issues at home and along its borders, the Indian government unveiled its Fiscal Year 2024-25 defense budget on July 23. Funds amounted to 6.219 trillion rupees, or approximately $74.3 billion in U.S. dollars, according to a government press release.

Defense received the highest share of any government department — 12.9% of the union budget — with Delhi stating in the release that the figure was 4.79% higher than last year’s defense budget and 18.43% higher than the FY2022-23 sum.

While the development sounds positive at face value, the 2024-25 defense budget is actually just 0.06% higher than last year’s total defense expenditure. The close proximity of these figures relates to Prime Minister Narendra Modi’s announcement in February, shortly before national elections, of an extra “interim” defense budget.

These numbers reflect the grave security situation that India faces due to longstanding tensions with Pakistan. What’s more, “India perceives a major defense challenge from China, which is a far larger economy and is spending more than India on its own defense,” Antoine Levesques, a research fellow at the International Institute of Strategic Studies, told Defense News.

The Stockholm International Peace Research Institute calculated India’s defense expenditure at 2.4% of GDP in 2023.

“By comparison, China, with its much larger economy than India’s, spends about 1.7% of its share of GDP on defense,” Professor Manjeet S. Pardesi, of the Centre for Strategic Studies at New Zealand’s Victoria University, told Defense News. “So, in a numerical sense, India is spending an adequate amount.

“The real issue is how this sum is being spent. If India continues to invest in building the capabilities to defend against and deter China (and Pakistan), then India’s defense spending is adequate. … [However,] the challenge for India is that China is rapidly expanding its capabilities and is increasingly technologically capable in terms of indigenous defense production — while spending a smaller share of its GDP on defense than India.”

Budget breakdown

India allocated its latest defense budget with 27.66% on capital assets; 14.82% on sustainment and operational preparedness; 30.66% on pay and allowances; 22.7% for defense pensions; and 4.17% for civil organizations under the defense ministry, the MoD revealed.

“The capital outlay of 1.72 trillion rupees will further strengthen the capabilities of the armed forces,” Defence Minister Rajnath Singh wrote on X, formerly Twitter.

Delhi’s announcement claimed this amount rose 9.4% from last year “to fill critical capability gaps through big-ticket acquisitions,” such as fighters, ships, submarines, drones and vehicles.

In its press release, the MoD promised 75% of this modernization budget would go to domestic industry. However, India did not break down figures for each armed service, something it’s done in previous years.

Sustainment and operational readiness, meanwhile, received INR920 billion, up 48% compared to two years ago. The money “will facilitate procurement of ammunition, mobility of resources and personnel as demanded by the security situation and strengthen the deployment in forward areas for any unforeseen situation,” government officials wrote.

Infrastructure along tense borders also received a boost.

“Up 30% year on year, this allocation of INR65 billion to the Border Roads Organisation will further accelerate our border infrastructure,” Singh wrote on X.

Key projects include the high-altitude Nyoma Airfield and 2.5-mile-long Shinku La tunnel in the northwest part of the country.

Emphasis on self-reliance

India faces a challenge in achieving a defense procurement balance between foreign purchases versus upscaling and upskilling its native defense industry, Levesques told Defense News.

“The Modi 3.0 government is keen to find new domestic policy margins to loosen this dilemma, with the help of foreign partners able and willing to invest in India’s defense industrial base and next-generation co-production and co-creation,” he said.

This approach is seen in “Aatmanirbharta,” a Modi government catchphrase that translates to “self-reliance.”

Correspondingly, the defense budget saw a huge increase for the Innovations for Defence Excellence scheme, which encourages indigenous technological innovation. Last year’s INR1.15 billion rose to INR5.18 billion in 2024-25, the MoD revealed.

The value of defense production hit record levels of INR1.27 trillion (U.S. $15.2 billion) in FY2023-24, according to an MoD press release published July 5. State-owned entities achieved 79.2% of this production, with private firms claiming the remainder. This number came in 16.7% greater than last year and 60% higher than four years ago, the ministry stated.

Still, “while India has had some limited successes in areas like the development of missiles, indigenous defense production — or self-reliance — is a long-term goal at best,” Victoria University’s Pardesi told Defense News.

“India will continue to partner with the U.S., France and even Russia,” he added. “[Not] becoming too dependent upon one single partner … will allow India to exercise a degree of strategic autonomy.”

Simultaneous to boosting domestic production, India’s defense exports topped new heights as well, reaching INR210 billion (U.S. $2.5 billion) in FY2023-24. This was up an impressive 32.5% year on year.