India's Defence Modernisation Budget

Experts emphasize that India's defence modernisation budget must increase by two and a half times by the next decade to meet ambitious defence production targets and equip armed forces for modern warfare. Research and development (R&D) expenditure should more than double, and the industry must triple its spending share in revenue.

Utilisation and Procurement

• India fully utilized its military modernisation budget in 2024-25, signing ₹2 trillion in defence contracts, double the FY24 amount.
• Operation Sindoor highlighted the importance of indigenous equipment for sovereign control, urging increased investments in production capacity and R&D.
• The Defence Acquisition Procedure (DAP) 2020 reforms are expected to streamline procurement processes, reducing field-trial durations significantly.
• Defence Secretary Rajesh Kumar Singh stated the MoD's efforts to shorten procurement timelines by 69 weeks, albeit insufficient.

Capital Outlay and Production Growth

• Domestic capital procurement significantly affects budget utilisation, with foreign capital procurement declining from 39-40% to 12.49% between FY15 and FY25.
• India's annual defence production increased by nearly 15% between FY24 and FY25 but may fall short of the ₹3 trillion target by FY29-30.
• Defence exports reached a record high in FY25, growing nearly 14% to surpass ₹24,000 crore.
• The modernisation budget grew 83.7% from FY20 to FY26, yet industry insiders call for a 20% CAGR growth to meet FY29 targets.

Increased Defence Outlay

• The defence budget aims to rise to 2.5% of GDP by FY30, up from the current 1.9%, with a medium-term target of 3%.
• The armed forces' modernisation outlay forms 21.88% of the MoD's total FY26 allocation of ₹6.81 trillion.
• Prof. Laxman Kumar Behera stresses the need to align India's defence outlay with global powers' allocations to equipment.
• FY21-24 saw varied modernisation expenditure across services, with the Navy and Air Force often exceeding their allocations.

Revised Budget Allocations

Since FY25, capital allocations for defence services are categorized by platform types, allowing seamless transfer of unspent funds among services, enhancing budget utilisation.

R&D Framework and Industry Involvement

• Despite increased domestic procurement, budget utilisation depends on timely industry execution and increased R&D investment.
• The KPMG India-CII report suggests increasing R&D to 10% of total defence expenditure by 2032, with industry R&D spends rising to 3% of revenues.
• The National Defence Technology and Innovation Framework (NDTIF) is recommended to promote and facilitate future defence technologies.

Conclusion

Indigenisation beyond assembly is crucial for future conflict preparedness, emphasizing self-reliance and stronger defence capabilities.