India to be third-biggest defence spender by 2020

To be next only to the US and China in amount spent on defence-related expenditure

By the year 2020, India could emerge as the third-biggest country in terms of defence-related expenditure, US-based consulting firm IHS projected in a study published on Friday.

India, home to the world’s second-largest population, currently stands eighth in total spending on defence (expenditure, procurement, research and development). The country in 2014 spent $47.78 billion (Rs 3,01,299 crore), higher than those like Germany, Brazil, south Korea, Italy, Canada, according to the IHS study, where the NYSE-listed research firm analysed specific forecasts for defence-related expenditure by 91 countries and captured 98 per cent of the global defence spend.

The US, which currently is the biggest spender on defence — it spent $586.92 billion in 2014 — is followed by China ($176.25 billion) as a distant second. The UK, Japan, the Russian federation, France and Saudi Arabia also spent more than India during the year, the IHS study revealed.

However, the study points out, though the US will continue to be on top in defence expenditure by 2020 as well, the combined spend by the Asia-Pacific, too, will have risen significantly by then. The region currently spends $170 billion less on defene than the US; by 2020, it will spend exceed the US on this. “Spending in Asia-Pacific, meanwhile, is expected to grow to $547.1 billion by 2020, over 30 per cent of the global total,” said Craig Caffrey, senior defence budgets analyst at IHS Aerospace & Defence.

The study also forecast defence spend to flat-line over the next two years, as fiscal constraints among oil-producing states in West Asia and North Africa removed a key source of growth.

“By 2019, for the first time in history, the North Atlantic Treaty Organization (Nato) will not account for a majority of worldwide defence expenditure. It accounted for almost two-thirds of global spending as recently as 2010,” said IHS. Nato expenditure was expected to fall in real terms from $869.6 billion in 2014 to $837.9 billion by 2020. By the end of the decade, defence spending would decline from 54.4 per cent of total expenditure to 48.5 per cent, it added.

“By 2019, the alliance (Nato) will fail to account for the majority of worldwide defence expenditure... By 2020, the centre of gravity of the global defence spending landscape is expected to have continued its gradual shift away from the developed economies of Western Europe and North America and towards emerging markets, particularly in Asia,” said Fenella McGerty, senior defence budget analyst at IHS Aerospace & Defence. 

Despite the region not being immune to the present challenges in the global economy, Asia’s defence expenditure growth is expected to accelerate from 3.3 per cent in 2014 to 4.8 per cent next year. Unlike in West Asia and North Africa, falling oil prices were expected to have a net positive effect on economic growth in China, India and Indonesia, and would aid government finances, the study said.
 

Defence expenses in 2014 |Create infographics