On February 1, 2025, India unveiled its Union Budget for fiscal year 2025-26, allocating a historic ₹6.81 lakh crore to the Ministry of Defence. This figure marks a 9.53% increase from last year and reflects the government's intent to bolster military capabilities amid rising global tensions.
Presenting the budget, Finance Minister Nirmala Sitharaman noted the importance of this allocation, particularly considering the geopolitical climate characterized by conflicts and heightened military engagements worldwide. Notably, the allocation includes ₹1.8 lakh crore focused on the modernization of India's armed forces, aimed at acquiring advanced technology and equipment.
The disclosed figures are significant when compared to the previous budget year, where ₹6.22 lakh crore was allocated to defence. The current year's budget allocation not only exceeds last year's numbers but also accounts for 1.91% of India's projected gross domestic product (GDP) for 2025-26. This highlights the Indian government's commitment to ensuring national security against potential threats.
A substantial component of the budget is dedicated to capital expenditure, pegged at ₹1.92 lakh crore. This includes investments in new weapon systems, aircraft, and other military technologies, with ₹1.48 lakh crore earmarked for direct acquisitions from domestic suppliers to encourage self-reliance.
Minister Sitharaman emphasized the necessity of modernisation against the backdrop of increasing defence budgets from regional adversaries. For example, Pakistan recently announced its defense budget, allocating ₹2.12 trillion for FY2024-25, reflecting nearly 17.6% growth year-on-year. Meanwhile, China’s estimated military expenditure stands at approximately $236 billion for the same period, depicting their continuous investment to expand military capabilities. Comparatively, India's budget remains significant yet focuses on indigenous technology development.
Highlighting the disparity, India's military forces are also facing pressures to evolve technologically. While the capital outlay is impressive, it prompts discussions among military leaders about the proportion allocated to research and development (R&D). With only ₹14,923 crore set aside for R&D—amounting to a mere 2% of the total budget—the call for increased funding is becoming urgent.
DRDO Chief, Samir V Kamat, pointed out the supply of qualified engineers capable of handling advanced research has become problematic, indicating the industry’s struggle to develop local innovations within the defense sector. He said, “We have to build real capacity in engineering colleges, where they get hands-on experience.” This capacity building is considered pivotal for ensuring industries can sustainably innovate and produce high-end defense technology.
Air Chief Marshal AP Singh raised alarm over the current levels of R&D funding, arguing they should represent at least 15% of the defense budget for India to effectively meet future warfare requirements. The experts’ consensus suggests not only should funds increase, but the procurements system also needs reform, promoting swifter and more efficient local partnerships.
Among the other notable allocations, ₹1.60 lakh crore has been set aside for defence pensions, addressing the financial needs of approximately 34 lakh retired defence personnel and their families. The Ministry aims to support these individuals amid rising living costs and inflationary pressures. Rigid adherence to cost containment from past budgets may have delayed operational commitments.
Overall, the Ministry of Defence has termed 2025 as the 'Year of Reforms,' aiming to transform the Armed Forces to become technologically advanced and ready for multi-domain operations. This initiative focuses heavily on R&D and enhancing integration across military operations.
The government's budget certainly serves as both reassurance against external threats and as impetus for domestic growth through local procurement. The comprehensive reforms anticipated this year may well position India not only for enhanced national security but also as a credible player on the global defense stage.
India recognizes the need to address new daring strategies which include cooperation with technological giants and integration of advanced technologies such as Artificial Intelligence, Machine Learning, and robotics within defence operations. Going forward, it remains to be seen how swiftly and effectively these allocations will translate to improved capabilities on the ground.