Budget 2025: Defence allocation sees marginal rise at 1.9% of GDP

In the Union Budget, Finance Minister Nirmala Sitharaman announced an allocation of Rs 6.81 trillion for defence on Saturday. The sector’s budget was almost Rs 6.22 trillion last year, and Rs 5.94 trillion the year before.

 

Like last year, the 2025-26 (FY26) Budget estimates the defence allocation to hover around 1.9 per cent of the gross domestic product (GDP). It fell to 1.9 per cent of the GDP in FY25 from 2.4 per cent in FY21.

 

The security establishment, which has been clamouring for more money for defence, citing India’s strategic challenges, is unlikely to be happy with this year’s budget but the finance ministry may have considered the complexity of the situation – an inability of the armed forces to spend all the money given annually – too.

 

“We have two nuclear rivals, we should be looking at spending a minimum of 3 per cent of the GDP on defence in the coming years,” Laxman Kumar Behera, who teaches at the Special Centre for National Security Studies, Jawaharlal Nehru University, Delhi, said.

 

It is unclear at the moment what portions of this year’s capital budget the three services will receive, because the breakup is no longer separately marked in public documents. With India increasingly attaching importance to its maritime security, the Navy’s share is expected to rise. 

 

The defence services’ capital outlay is Rs 1.8 trillion this year. It was Rs 1.72 trillion last year. In the FY26 Budget, the revenue expenditure is estimated to be Rs 4.89 trillion, including Rs 1.61 trillion for pensions.

 

Under “capital expenditure”, Rs 48,614 crore has been set aside to buy and maintain aircraft and aero engines while Rs 24,391 crore has been allocated for the naval fleet. In addition, Rs 63,099 crore is expected to be spent on other equipment.

 

India’s emphasis on building infrastructure in the border areas is reflected in the budget, with an increase of funds for the Border Road Organisation (BRO) from Rs 6,500 crore last year to more than Rs 7,000 crore this year.

 

The government’s Defence Research and Development Organisation (DRDO) will get Rs 26, 800 crore this year.

 

The growth in India’s defence budget has not corresponded with its economic rise in the recent years. While being the world’s fifth-largest economy with the second-largest standing Army, India is the world’s largest developing country by population.

 

“The central government has to take care of social development, too,” said retired Lieutenant General S L Narasimhan, who is an expert on India-China relations, adding that he doesn’t see this Budget as one that prioritises one sector over the other.

 

“Let us spend the capital budget first. Then ask for more,” he said of the monetary road map for defence.

 

The Ministry of Defence has designated 2025 as its “year of reform”, when acquisition procedures are expected to undergo significant changes.