The Union Budget for 2025-26 has been a welcome move for the middle class, with significant tax relief across the board, including for senior citizens. Simultaneously, the defence budget has witnessed a marginal rise from ₹6.22 lakh crore to ₹6.81 lakh crore. However, the pertinent question remains—does this allocation suffice to counter India’s multifaceted security threats?
Rising Threats: A Persistent Challenge
India faces an evolving security landscape, with a looming two-front challenge from adversarial neighbors that threatens to merge into a seamless, single-front conflict. Beyond conventional threats, cyber warfare, information warfare, and terrorism continue to pose significant risks. These challenges are further compounded by the advent of disruptive technologies such as AI-driven manned-unmanned systems and drone warfare. Additionally, India is situated in one of the most nuclearized regions in the world, further escalating security concerns.
Despite a commendable push for self-reliance, evidenced by last year’s record-breaking domestic defence production of ₹1.26 lakh crore and exports worth ₹21,083 crore, budgetary allocations reveal key areas needing urgent attention.
Capital Expenditure and R&D: The Achilles’ Heel
Although approximately 28% of the total defence budget is allocated to capital expenditure, the persistent concern remains India’s inadequate spending on Research and Development (R&D). The government’s ₹20,000 crore provision for private-sector R&D investment is a positive step, but it falls short of the aggressive investments made by leading global militaries, which allocate double-digit percentages of their budgets to R&D.
This year’s capital expenditure allocation includes ₹48,614 crore for aircraft and aero engines, ₹24,390 crore for the naval fleet, and ₹63,099 crore for other essential equipment, such as tanks, artillery, air defence systems, and next-generation weaponry. While the focus on modernization is evident, whether this is sufficient for comprehensive capability enhancement remains debatable.
Indigenisation vs. Operational Readiness
The government’s ‘Atmanirbharta’ initiative has set aside 75% of the capital expenditure for indigenous equipment procurement. While this is commendable in boosting domestic defence manufacturing, the rigid indigenisation policy might hinder timely acquisitions, especially when the Indian Armed Forces require urgent capability upgrades. Over-reliance on indigenous production may inadvertently delay critical defence acquisitions, impacting operational readiness. A more flexible approach, balancing indigenous development with select foreign procurements, could ensure a robust and timely modernization strategy.
The Burden of Pay and Pensions
Another crucial aspect skewing defence budget allocation is the expenditure on pay and pensions, which continues to overshadow capital expenditure. Despite a 50% increase in capital expenditure since 2015, the pension burden distorts the real picture of India’s defence spending. While the budget appears to constitute approximately 12-13% of the central government’s total expenditure, a significant portion is allocated to pensions. A structural reform, delinking pensions from the defence budget, would provide a clearer assessment of actual defence investments.
The Way Forward: Strategic Focus and Policy Consistency
Despite these limitations, the government deserves credit for maintaining a consistent policy of focusing on capability-building through indigenisation and ensuring steady growth in the defence budget. However, to stay ahead of emerging security challenges, India must:
- Increase R&D Investment: Raising R&D spending beyond the current 1% of the budget to levels comparable with global standards is critical.
- Enhance Flexibility in Procurement: While promoting domestic defence production is necessary, operational exigencies should dictate a more flexible procurement policy.
- Reform Defence Budget Structuring: Separating pension liabilities from the core defence budget will offer a more accurate picture of actual defence spending.
- Accelerate Modernisation: Capital expenditure must see a steeper rise to accommodate next-generation technologies and maintain operational superiority.
India’s defence budget for 2025-26 reflects the government’s commitment to capability-building, but it must evolve dynamically to address the country’s ever-growing security concerns. The balance between fiscal prudence and strategic necessity will ultimately determine India’s military preparedness in an increasingly volatile geopolitical environment.
