India has overtaken Saudi Arabia to become the fourth largest military-spender of the world, the top three being the United States ($916 billion), China ($296 billion) and Russia ($109 billion) in that order, according to the latest survey released by the Swedish think tank , the Stockholm International Peace Research Institute (SIPRI).
But, is India spending enough on its defense given the deteriorating strategic environment it is confronted with? The answer, if India’s military veterans and analysts are to be believed, is a big “No”.
In a report released on April 22, SIPRI said that with military expenditure of $83.6 billion in 2023, India was the fourth largest spender globally. Indian spending was up by 4.2 per cent from 2022 and by 44 per cent from 2014.
The increase in India’s military spending was mainly a result of growing personnel and operations costs, which made up almost 80 per cent of the total military budget in 2023. This aligned with the government’s priority to strengthen the operational readiness of the armed forces amid ongoing tensions with China and Pakistan.
However, it is important to note that capital outlays to fund military procurement in India remained relatively stable, at around 22 per cent of the budget in 2023.
And what is equally important to note from the SIPRI report is that a total of 75 per cent of these outlays went towards equipment produced domestically, which was the highest level ever and up from 68 per cent in the previous year. The continued shift towards domestic procurement reflects India’s goal of becoming self-reliant in arms development and production, the report said.
In other words, India is spending now more and more on procuring Made-In-India arms. As Indian defense minister Rajnath Singh said the other day , the defence production in India has crossed Rs one lakh crore mark in the year 2023-24.
However, the fact remains that given India’s strategic environment, the country is arguably spending the least, compared to the other major powers of the world. As the SIPRI report says, most of the military budget of India goes towards meeting the hefty increase in manpower, both serving and retired (pensions).
The interim defense budget that Finance Minister Nirmala Sitharaman presented on February 1 for FY 2024-’25 is not really that inspiring for military veterans and analysts. Of the total allocations of INR47, 65,768 crore (approx. US$574 billion), she earmarked INR6, 21,541 crore (US$74.8 billion) to the Ministry of Defence (MoD). It represented an increase of 4.7 percent over the previous allocations. But as Amit Cowshish, a former former Financial Advisor (Acquisition), the Ministry of Defence, says, this rise is the lowest in the last ten years, except for the FY 2020-21 when it was a mere1.45 percent.
In contrast, just last year, defence budget was hiked by 13.02 per cent (which the SIPRI seems to have taken note of).
The allocation proposed in the interim budget accounts for 13.05 per cent of total Central Government Expenditure (CGE), and 1.9 per cent of the estimated nominal Gross Domestic Product (GDP) of FY ’25. “If it’s any consolation, these percentages are in keeping with the corresponding figures of 13.18 per cent and 1.97 per cent respectively for the current FY 2023-24, which ends on March 31. Technically, the proposed outlay could be increased in the regular budget, which will be presented after the constitution of the 18th Lok Sabha, but it seems unlikely”, Cowshish says.
The fact remains that the gap between the funds demanded by the armed forces for revenue and capital expenditure and the budget allocated to them has been widening in India. It went up from ₹ 71,262 crore in 2014-15 to ₹ 1, 12,137 crore in the FY 2018-19 before sliding down to ₹ 33,214 crore in 2023-24.
The capital budget of the armed forces, which caters for acquisition of land, equipment, weapons systems, and other military capabilities, apart from construction of infrastructure, too has been under strain. In the FY 2015-16, for example, the gap between the requirement projected by the armed forces for capital expenditure and the amount allocated for the purpose was ₹ 16,646 crore, which went up to ₹ 63,328 crore in the FY 2022-23.
Of course, in an attempt to expedite atmanirbhrata (self-reliance) in defense, the finance minister announced in the interim budget the launch of a new scheme for “strengthening deep-tech technologies for defence.” It has been decided to establish a “corpus of rupees one lakh crore…with fifty-year free loan.” The corpus, she elaborated, “will provide long-term financing and refinancing with long tenors and low or nil interest rates;” and “encourage the private sector to scale up research and innovation significantly in sunrise domains.”
It may be noted that in the Indian Defense sector, the Defence Research and Development Organisation (DRDO) has a near-monopoly on R&D with the industry, barring few public sector entities. But, the paucity of funds has affected it. Its share in the total defence budget increased from 4.49% in the FY 2004-05 to 7.74% in the FY 2013-14, but subsequently declined from 5.36 per cent in the FY 2014-15 to 3.84 per cent in the FY ’25. This decline was expected to be made up by private sector investment in defence R&D but no credible data is available to indicate if the expectation has been vindicated.
“The share of defence R&D in the total defence budget is too low to produce spectacular results’, argues Cowshish.
Interestingly, while the SIPRI report says that India’s military spending was about 2.4 percent of its GDP in 2023, Indian analysts disagree. According to them, it is 1.9 percent of the GDP and 13 percent of Central Government Expenditure (CGE). And what is said to be further worrisome, this figure as a percentage of the GDP of India is said to have declined over the years instead of going up.
In contrast, the corresponding figure in the U.S. is 3.4 percent. In China, it is 1, 7 percent and Russia 5.9 percent. Eleven of the 31 countries of NATO do now spend 2 percent of their respective GDPs. In Asia, Japan is spending 1.2 percent of its GDP for military and South Korea 2.8 percent.
Here, it is also to be noted that the GDPs of the U.S, China and Japan are significantly higher than that of India, thereby meaning that India’s military expenditure is much less in concrete terms of dollars. That explains why veterans and experts and many Indian law-makers (Members of Parliament) have invariably demanded a hike of defense spending to at least 3 percent of GDP.
And they do have a point. As Nan Tian, the SIPRI report’s senior author, says, “The unprecedented rise in military spending is a direct response to the global deterioration in peace and security”. For India, China’s increasing military activities in the Indo-Pacific in general and at the Line of Actual control of the contested border claims in particular, coupled with its deepening strategic and military relations with Pakistan, are always huge challenges. And if one adds here the ongoing wars between Russia and Ukraine ( both sources of Indian military equipment) and the one between Israel and Hamas/ Iran in the Middle east ( having huge implications for India in energy, commerce, trade and foreign remittances ), India needs a more robust military and much bigger military budget than what SIPRI has revealed.
By Prakash Nanda
(prakash.nanda@hotmail.com)
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