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Defence spending rises, but not its share in GDP

Operation Sindoor might prompt an increase in expenditure in the coming years

3 min read
Updated On: Jan 10 2026 | 3:43 AM IST
Bhaswar Kumar
The budget bag (Photo: Reuters)

The budget bag (Photo: Reuters)

In recent years, the decline in defence expenditure as a proportion of gross domestic product (GDP) has often been justified by pointing to the sharp rise in absolute allocations. Since the National Democratic Alliance government led by Prime Minister Narendra Modi assumed office in 2014, the defence budget has more than tripled. 
The Ministry of Defence’s (MoD’s) overall budgetary allocation rose to ₹6.81 trillion in financial year (FY) 2025-26 from ₹2.18 trillion in FY 2014-15. However, as a share of GDP and central government expenditure (CGE), the FY 2025-26 defence budget stood at 1.91 per cent and 13.45 per cent, respectively, compared with 2.08 per cent and 13.15 per cent in FY 2014-15. That said, the downward trend has not been uniform. Between FY 2016-17 and FY 2018-19, defence spending consistently exceeded 2 per cent of GDP and 17 per cent of CGE. Another notable exception was FY 2020-21, when defence expenditure rose to 2.45 per cent of GDP, even as its share of CGE declined to 13.84 per cent.
    Taken together, the data show that while defence allocations have risen sharply in absolute terms, their relative priority within the Budget has fluctuated — and, outside brief reversals, trended downward over the past decade.
  The intense clashes with Pakistan between May 7 and 10, codenamed Operation Sindoor, could alter the status quo. The outlay for procuring new defence equipment and weapon platforms in next year’s Budget is likely to increase, with the MoD set to seek a 20 per cent rise in the defence budget’s modernisation component for the coming FY — almost double the usual rate of increase seen in previous years. This component has also more than doubled in absolute terms between FY 2014-15 and FY 2025-26, rising from over ₹0.66 trillion to nearly ₹1.49 trillion. 
Available data also show that utilisation of the overall capital budget by the three armed forces varied between FY 2020-21 and FY 2023-24. The Army recorded the poorest utilisation, underspending its allocations in three of the four years, with FY 2022-23 the sole exception in which expenditure exceeded the allocation. The modernisation component is embedded within the overall capital allocation.
  With Indian military planners underscoring rising global volatility and a growing willingness among states to resort to conflict, an increase in defence expenditure as a proportion of GDP in the coming years is likely under consideration.  
 
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Written By :

Bhaswar Kumar

Bhaswar Kumar has over seven years of experience in journalism. He has written on India Inc, corporate governance, government policy, and economic data. Currently, he covers defence, security and geopolitics, focusing on defence procurement policies, defence and aerospace majors, and developments in India’s neighbourhood.
First Published: Jan 10 2026 | 3:43 AM IST

In this article : Budget 2026Defence budget

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