By Girish Linganna
As India awaits the presentation of the Union Budget 2025-26, the defence sector is poised at a crucial juncture. Building on the foundation laid in the previous year, the 2025-26 budget needs to navigate the complexities of evolving security challenges while sustaining the momentum towards self-reliance and modernization. This delicate balancing act will determine the trajectory of India’s defence capabilities for years to come.
Reflecting on the 2024-25 allocation, the defence budget provided valuable insights into the government’s priorities. It saw a total allocation of Rs. 6.22 lakh crore, representing a 4per cent increase compared to the preceding year. This amounted to 12.9per cent of the total budget and 1.89per cent of the country’s estimated GDP, figures consistent with recent trends.
A closer look at the 2024-25 allocation reveals the following breakdown: 27.66per cent for capital expenditure dedicated to acquiring new equipment, upgrading existing platforms, and investing in critical infrastructure; 14.82per cent for revenue expenditure covering the essential operational costs of the armed forces, including maintenance, training, and day-to-day running expenses; 22.70per cent allocated to defence pensions to meet the pension obligations for retired military personnel; and 4.17per cent for civil organizations under the MoD, covering the expenses of various civil organizations that function under the Ministry of Defence, providing essential administrative and support services.
Looking ahead to 2025-26, the budget is expected to build upon the foundation established in the previous year, with some key focus areas and potential shifts in allocation:
The commitment to ‘Aatmanirbhar Bharat’ (Self-Reliant India) in defence is likely to be reinforced, with the figure of 75per cent of procurement funds reserved for domestic manufacturers, totalling Rs. 1.06 lakh crore in 2024-25, expected to increase further in 2025-26, incentivizing indigenous production and reducing reliance on foreign suppliers.
Modernization remains a top priority, with the capital expenditure outlay projected to rise to approximately Rs. 1.9 lakh crore, enabling the acquisition of advanced equipment for all three services, including new fighter jets, transport aircraft, and unmanned aerial systems (UAS) for the IAF, modern warships and submarines for the Navy, and upgraded armored vehicles, artillery systems, and infantry equipment for the Army.
The ongoing challenges along India’s borders with China and Pakistan necessitate continued investment in border infrastructure, with the 2025-26 budget expected to allocate substantial resources to enhance roads, bridges, and other infrastructure in sensitive and strategically important border regions, ensuring rapid deployment and logistical support for troops.
The drone industry is poised for a significant boost, with increased funding for R&D, coupled with streamlined regulations and skill development initiatives, aiming to foster a vibrant domestic drone manufacturing ecosystem and unlock the vast potential of drones across various sectors, including agriculture, logistics, disaster relief, and surveillance.
India’s maritime sector, particularly the shipbuilding industry, requires strategic investments to enhance its capabilities and competitiveness, with increased funding for ports and shipyards, along with support for domestic shipbuilding companies, crucial to revitalize this sector and contribute to India’s blue economy aspirations.
The declining trend of defence expenditure as a share of the total budget raises concerns, with the projected drop to 13per cent in 2025, the lowest since the 1960s, necessitating a careful balancing act between fiscal prudence and strategic security imperatives.
The DRDO’s budget is likely to see a further increase in 2025-26, with a focus on basic research, development of critical technologies like hypersonic weapons and AI, and fostering partnerships with private companies, although the current investment in defence R&D, at 1per cent of the defence budget, needs to be significantly increased to ensure India’s long-term technological edge and competitiveness in the global arena.
While the exact figures will be revealed in the budget presentation, it is estimated that the 2025-26 defence budget could be in the range of Rs. 6.5 to 7 lakh crore. This would represent a modest increase from the 2024-25 allocation, keeping pace with inflation and the growing needs of the armed forces. A likely breakup of this estimated budget could be as follows: (1) Capital Expenditure: Rs. 2.0 to 2.2 lakh crore (Increased allocation for modernization); (2) Revenue Expenditure: Rs. 1.5 to 1.7 lakh crore (Maintaining operational readiness); (3) Defence Pensions: Rs. 1.6 to 1.8 lakh crore (Meeting pension obligations); (4) Civil Organisations under MoD: Rs. 0.4 to 0.5 lakh crore (Supporting administrative functions); and (5) Research and Development: Rs. 0.3 to 0.4 lakh crore (Increased investment in R&D).
The 2025-26 Defence Budget presents both challenges and opportunities. Balancing modernization, indigenous production, R&D, and infrastructure development while maintaining fiscal discipline will be a key challenge. Addressing the declining trend of defence spending and limited R&D investment will be crucial to ensure India’s strategic autonomy and preparedness for future challenges. The budget also offers an opportunity to leverage the strengths of both the public and private sectors in defence manufacturing. Fostering greater collaboration and technology transfer will be essential to accelerate the development of indigenous capabilities and reduce dependence on foreign suppliers.
The 2025-26 Defence Budget will be a defining moment for India’s defence sector. It will signal the government’s commitment to building a modern, self-reliant, and technologically advanced military capable of safeguarding the nation’s interests in an increasingly complex and unpredictable global environment. By strategically allocating resources and fostering innovation, India can ensure its security and emerge as a leading power in the 21st century. (IPA Service)
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