India, the world’s largest democracy, faces unique geopolitical challenges and security concerns that necessitate a robust defence budget. On July 23, India’s Finance Minister Nirmala Sitaraman presented the Union Budget for the financial year 2024–25, which was the first budget of the Coalition BJP-led NDA since Prime Minister Narendra Modi began his third term. The finance minister announced an allocation of Rs 48.20 lakh crore (US$585 billion) for the total expenditure for FY 2024-25, of which the Ministry of Defence (MoD) received Rs 6.22 lakh crore (US$75 billion) for the defence budget. The MoD’s budget, which amounts to 13 per cent of the Central government’s expenditure, constitutes the highest allocation among all the ministries. The MoD continues to receive the highest allocation among all the ministries. The MoD’s interim allocations, presented on February 1, remained unchanged in the budget. It does provide an overview of the general direction of India’s spending priorities for the defence establishment.
However, if we compare the United States’ total budget expenditure, which is approximately US$5 trillion with a defence budget of US$842 billion, and China’s, which spends close to US$4 trillion annually with a defence budget of US$241 billion, the differences are significant. Now, the question arises: Why does India need a defence budget of US$100 billion? Given that the global defence budget has reached a record high of US$2,443 billion and that all countries are rapidly increasing their military spending, it appears that the next world war could be imminent. For example, Poland increased its military spending by almost 75 per cent, Turkey increased its military spending by almost 150 per cent, and the UK decided to increase its defence budget by 2.5 per cent of GDP, which amounts to around US$100 billion.
Looking at India’s current geostrategic location is surrounded by hostile neighbours such as Pakistan and China, both of whom have a history of conflict with India. In the current scenario, many experts believe that India can face a two-front-like situation from both countries in the future, so in order to avoid such conflict and be ready for war, India needs a strong defence budget to sustain itself. Over the last few financial years, India’s defence budget has seen a notable increase. There has been a steady upward trend in the budget estimate for defence, with a significant allocation to the Indian army. The defence budget for FY 2023-24 stood at Rs 5.94 lakh crore (US$72 billion), up from Rs 4.78 lakh crore (US$58 billion) in 2021-22. However, it still requires a Rs 10 lakh crore (US$100 billion) defence budget to meet the needs of modernising military capabilities, ensuring national security, fostering technological advancements, and supporting India’s economic growth in the long term.
India produces a raft of weapons and systems, including the light combat aircraft LCA Tejas, different types of helicopters, warships, tanks, artillery, guns, missiles, rockets, and a variety of military vehicles. However, one question looms large: how indigenous are India’s own defence products?
The defence budget includes allocations for India’s three defence services, the Army, Navy, and Air Force, allocating a substantial amount to augment military capabilities to strengthen defences against foreign powers. India stands fourth in the Global Firepower military strength list of 2024, ranking above countries such as the United Kingdom, South Korea, and Japan. Similarly, the United States tops the list, followed by Russia and China. In terms of naval forces, India estimates over 5 million military personnel and possesses a total of 2,210 aircraft, 4,614 tanks, and 295 assets. India’s national policy has been non-confrontational, with an emphasis on resolving issues diplomatically through dialogue and negotiations.
India has fought several wars since its independence; the first one was in 1947-48. The Pakistan War, also referred to as the initial Kashmir War, led to a subsequent conflict with China in 1962, sparking a surge in defence expenditures and military advancements. The reinvigorated military machine then blunted Pakistan’s aggression in 1965, followed by India splitting Pakistan into two during a lightning war in 1971, leading to the creation of Bangladesh and finally the Kargil conflict in 1999. All these wars indicate that the Indian army commands a growing majority of the military budget allocations and an even larger share of military personnel.
Taking lessons from these upheavals in the Western world, it is imperative for India to undergo military modernisation and establish self-reliance, as it is now flexing its diplomatic muscles on the international stage to pursue an assertive foreign policy. This underscores the importance of the indigenisation goal that Prime Minister Modi has set out to achieve in the Aatmanirbhar Bharat. Over the past few years, India has been rapidly attempting to indigenise its military supplies to boost its supplies. The Defence Acquisition Procedure 2020 has allocated a record 75 per cent of the defence budget to domestic industry. In 2023-24, the allocation of the capital procurement budget to domestic industry increased from 68 per cent in 2022-23. On July 16, in a significant move to strengthen autonomy in the defence sector and to reduce dependence on imports, the Ministry of Defence released the fifth positive indigenisation list, also known as the Positive Indigenisation List (PIL), which consists of 346 items. This list includes crucial line replacement units of subsystems, assemblies, spares, components, and raw materials, representing an import substitution value of 1,048 crore (US$125 million). According to the defence ministry, over 12,300 items have already undergone indigenisation in the last three years. Defence Public Sector Undertakings (DPSU) will produce the listed items.
The Philippines, facing a maritime security threat from China, has hailed the BrahMos cruise missiles as a game changer. India’s exports reached almost Rs 21,000 crore in the current year, with a target of Rs 35,000 crore by 2025 and approximately Rs 50,000 crore by 2029.
The MoD has set a goal to achieve a turnover of US$25 billion in defence manufacturing within the next 5 years. India now produces a raft of weapons and systems, including the light combat aircraft LCA Tejas, different types of helicopters, warships, tanks, artillery, guns, missiles, rockets, and a variety of military vehicles. However, one question looms large: how indigenous are India’s own defence products? According to Statista, even major defence producers like the United States and France import weapons systems, indicating that the indigenous weapon systems include imported components. From 2019 to 2023, India was the world’s largest arms importer; it bought 99.8 per cent of the total global arms imports. Saudi Arabia, Qatar, and Ukraine trail behind India. However, this trend is changing in countries such as Pakistan, Japan, Egypt, Australia, South Korea, and China. India’s military exports have seen a significant surge in the last few years; in fact, India’s defence exports reached an all-time high of Rs 21,083 crore (US$2.63 billion) in FY 2023-24, with a growth of 32.5 per cent compared to the previous fiscal year of Rs 15,920 crore.
Similarly, India exports arms to 85 nations, including Italy, the Maldives, Russia, Sri Lanka, the UAE, the Philippines, Saudi Arabia, Poland, Egypt, Israel, Spain, and Chile. India delivered BRAHMOS missiles to the Philippines, under the recently signed US$375 million deal with Manila. This agreement constitutes India’s most valuable defence export deal to date. According to reports, the Philippines wants more BRAHMOS missile batteries from India. The Philippines, facing a maritime security threat from China, has hailed the supersonic cruise missiles as a game changer, signalling a shift in the current trend. India’s exports reached almost Rs 21,000 crore in the current year, with a target of Rs 35,000 crore by 2025 and approximately Rs 50,000 crore by 2029.
Achieving self-reliance in defence is important for India to maintain strategic global autonomy and achieve its aim to triple the annual defence production by 2028-29. A US$100 billion defence budget is critical to supporting these objectives and ensuring India’s long-term security and economic growth.
The government has opened up the defence industry to the private sector, implementing a policy that allocates 90 per cent of the defence budget to domestic industry, with the public sector accounting for 75 per cent and the private sector for 25 per cent. According to the report, India’s military spending was primarily due to escalating personnel and operations costs. The increase also aligns with the government’s emphasis on improving the operational readiness of the armed forces, particularly ongoing tensions with neighbouring countries. Reports indicate that Pakistan’s military spending dropped to US$8.5 billion in 2023, a decrease of US$13 billion, relegating it to the 30th position globally. However, China’s military expenditure grew by US$6 billion, allowing it to retain its second position. India has the fifth-largest economy, but it lacks a manufacturing sector, and investing in it is the only way to modernise the country.
Aatmanirbhar India needs a defence ecosystem, and the manufacturing sector alone accounts for only 10 per cent of the country’s GDP. China’s manufacturing sector contributes nearly 32 per cent to its GDP. However, China’s goods are present in every country, and over 150 countries use them. This demonstrates the strength of their manufacturing sector. It’s not that India hasn’t started, but we’ll leave it to the government’s discretion. It will take approximately 10 to 15 years to reach a reasonable level of self-reliance. The record-breaking defence production in less than a decade successfully reflects India’s Make in India programme. India not only indigenised the production of a large number of defence items, but it also became a significant arms exporter. Achieving self-reliance in defence is important for India to maintain strategic global autonomy and achieve its aim to triple the annual defence production by 2028-29. A US$100 billion defence budget is critical to supporting these objectives and ensuring India’s long-term security and economic growth.
-The writer is Special Advisor for South Asia, Parley Policy Initiative, Republic of Korea. He is a regular commentator on water security and transboundary river issues in South Asia. He tweets on X (formerly Twitter) @The_China_Chap. The Views expressed are personal.
