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India’s Defence Likely To Get Another Budgetary Push Amid Geopolitical Conundrum

Sangeet Kumar Sanu Jul 19, 2024

Over the past four years, India’s defence budget has steadily increased, demonstrating a commitment to strengthening its defence capabilities in the face of growing security challenges

India's defence budget has seen significant increases over the past few years, reflecting strategic adjustments, geopolitical changes, and economic challenges. This growth is driven by the need for modernisation, border security, and boosting self-reliance in defence manufacturing.

Over the past four years, India’s defence budget has steadily increased, demonstrating a commitment to strengthening its defence capabilities in the face of growing security challenges. Starting at Rs 4.71 lakh crore in 2020, it increased to Rs 4.78 lakh crore in 2021, Rs 5.25 lakh crore in 2022, and Rs 5.94 lakh crore in 2023. The projected budget for 2024 is expected to surpass Rs 6 lakh crore, continuing this upward trend.

For the financial year 2024-25, the defence budget has reached Rs 6,21,540.85 crore, which is 13.04 per cent of the total union budget, presented by Finance Minister Nirmala Sitharaman on 1 February 2024. This allocation is almost one lakh crore higher than the previous year, an 18.35 per cent increase from FY2022-23 and a 4.72 per cent increase from FY 2023-24. Despite this growth, India still lags behind major global powers like the US, China and Russia in absolute defence spending.

According to the Stockholm International Peace Research Institute (SIPRI), global military expenditures reached USD 2.4 trillion in 2023, marking a 6.8 per cent increase from the previous year. This increase is driven by geopolitical tensions and conflicts, such as the Ukraine war. While India's military expenditure grew, China's increased by 6 per cent and Russia's spiked by 24 per cent.

Focus On Modernisation And Equipment Acquisition
A significant portion of India’s increased budget has been allocated to modernisation and equipment acquisition. The capital outlay for new technology and equipment rose from Rs 1.35 lakh crore in 2021 to Rs 1.62 lakh crore in 2023. This investment aims to enhance India’s military capabilities across air, sea, and cyberspace domains. Sandeep Shah, Co-founder and managing director (MD) of Optimized Electrotech stresses the importance of aligning the budget with sustaining the momentum generated by record capital procurement.

The “Atmanirbhar Bharat” (self-reliant India) initiative has significantly influenced India's defence spending strategies. The share of the defence capital procurement budget allocated for domestic procurement increased from 68 per cent in 2022-23 to 75 per cent in fiscal 2025, with 25 per cent reserved for the private sector. The Defence Procurement Procedure (DPP) has introduced stringent timelines for Defence Public Sector Undertakings (DPSUs), encouraging indigenisation and reducing import dependency. Over the last three financial years, the Ministry of Defence (MoD) signed 122 contracts for capital procurement of defence equipment, with 87 per cent of the total contract value signed with Indian vendors.

The chief executive officer (CEO) of Triton Logistics and Maritime, Jitendra Srivastava said, “Improved infrastructure can indirectly benefit commercial logistics by providing better facilities and transport routes. Increased defence spending might also result in greater reliance on global supply chains for raw materials and components. This can influence logistics by necessitating the development of more resilient and efficient supply chain networks to support defence manufacturing.”

Significant changes in India's defence budget can affect regional power dynamics, particularly in South Asia and the Indian Ocean region, Srivastava added. Notably, the Defence Research and Development (R&D) sector saw growth, but the budget growth stagnated, with allocations increasing marginally from Rs 10,484 crore in 2021 to Rs 11,375 crore in 2022. This highlights the challenges in balancing immediate procurement needs with long-term innovation goals, despite recent policy shifts towards fostering self-reliance in defence technology.

India's defence budget from 2020 to 2024 reflects a period of strategic recalibration amidst economic challenges and evolving security dynamics. The increase in expenditure, driven by modernisation, border infrastructure, and self-reliance initiatives, underscores India's commitment to strengthening its defence capabilities.

However, efficient allocation and increased focus on R&D and indigenisation are crucial for aligning with modern military needs. As India navigates complex geopolitical landscapes, sustaining and optimising its defence budget will be pivotal in ensuring long-term security and strategic autonomy, experts noted.