On February 1, the Indian government introduced its draft defense budget for the fiscal year 2025-26, proposing an allocation of 6.81 trillion Indian rupees ($78.7 billion). This marks a 9.5% increase compared to the previous year’s budget.The year’s allocation is 9.5% higher than what it was in the budget estimates ( ₹6.22 lakh crore) for the financial year 2024-25, and around 6% more than last year’s revised estimates ( ₹6.41 lakh crore), budget documents showed

Budget Breakdown

• Military Salaries and Pensions: A significant portion of the budget, 4.7 trillion rupees ($54.3 billion), is designated for personnel expenses, covering salaries and pensions, which constitute over 69% of the total defense expenditure.
• Modernization and Weapon Procurement: The government has allocated 1.8 trillion rupees ($20.8 billion) for upgrading military capabilities, including investments in advanced technologies and new weapon acquisitions.

Key Expenditure Areas

• Aircraft and Engines: 486 billion rupees ($5.6 billion) is set aside for acquiring aircraft equipment and engines.
• Naval Expansion: 243.9 billion rupees ($2.8 billion) will be used for constructing new warships and submarines.
• Research and Development: 320 billion rupees ($3.7 billion) is earmarked for innovation in defense technologies.

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Modernization Plans and Future Acquisitions

To promote self-reliance, the Ministry of Defence has confirmed that 75% of the modernization budget will be allocated to domestic manufacturers under the Atmanirbhar Bharat (Self-Reliant India) initiative

India aims to enhance its military capabilities by procuring long- and medium-endurance unmanned aerial vehicles (UAVs), carrier-based fighter jets, as well as additional submarines and warships. Moreover, there is a strong focus on developing artificial intelligence (AI), machine learning, and robotics to strengthen defense operations.

Despite the budget increase, analysts suggest that the 4.6% rise in the capital expenditure budget may not be sufficient to accelerate military modernization at the desired pace, especially given the growing competition with China, as per some Defence analysts.

Additionally, Indian Defence failed to utilize 125 billion rupees ($1.4 billion) from its defense budget for fiscal year 2024, which concludes on March 31. The underspending was attributed to prolonged approval processes and challenges in awarding large contracts.

Strengthening Border Infrastructure

The government has allocated 71.5 billion rupees ($827 million) to the Border Roads Organisation (BRO) to enhance infrastructure in strategically significant border areas. Key projects include:

• LGG-Damteng-Yangtse in Arunachal Pradesh
• Asha-Chima-Anita in Jammu and Kashmir
• Birdhwal-Puggal-Baju in Rajasthan

Emphasis on Reform

The Ministry of Defence has designated the fiscal year 2025-26 as the “Year of Reform,” focusing on streamlining procurement procedures and improving budgetary efficiency. These reforms aim to accelerate decision-making processes and optimize resource utilization for enhanced national security.

With these strategic investments and reforms, India is taking a significant step toward strengthening its military capabilities while reinforcing its commitment to self-reliance in defense manufacturing.