Defence Budget 2025 Falls Short: Fails to Deliver the Firepower India Needs
In her eighth consecutive budget speech, Finance Minister Nirmala Sitharaman allocated ₹6.81 lakh crore towards defence expenditure for FY25, a 9.5% increase from the previous fiscal’s budgetary estimates and a 6.3% rise from the revised figures. While this increase might seem substantial on paper, experts and industry observers argue that it fails to address India’s growing strategic challenges.
A Closer Look at the Numbers
The Ministry of Defence remains the largest recipient of budgetary allocations, receiving ₹6,81,210 crore, with a capital outlay of ₹1,92,387 crore. The revenue expenditure, which includes salaries, pensions, and operational costs, is set at ₹4,88,822 crore, with pensions alone accounting for ₹1,60,795 crore.
Key capital allocations include:
- ₹48,614 crore for aircraft and aero engines
- ₹24,390 crore for naval fleet expansion
- ₹63,099 crore for equipment procurement
However, despite the increase in total allocation, the capital expenditure growth is limited. The capital outlay of ₹1.8 lakh crore for military modernization represents just a 4.6% increase from the previous year’s ₹1.7 lakh crore. Adding to the concerns, the defence ministry returned ₹12,500 crore as unspent funds under capital expenditure, raising questions about planning and execution.
Missed Opportunity in Modernization
India is in the middle of several critical defence procurements, including 26 Rafale-Marine fighter jets (₹63,000 crore), three additional Scorpene submarines (₹38,000 crore), and 156 Prachand light combat helicopters (₹53,000 crore). However, the new budget’s limited growth in capital expenditure threatens to slow down these acquisitions, affecting India’s military preparedness.
Experts argue that 1.9% of GDP for defence spending is insufficient, as a minimum of 2.5% of GDP is required to counter evolving threats from China and Pakistan. Comparatively, countries like the U.S. and China allocate significantly higher portions of their GDP towards defence.
Defence Stocks Take a Hit
Following the budget announcement, defence and aerospace stocks plunged, with leading firms like HAL, Bharat Dynamics, BEL, and BHEL dropping up to 6%, while private players such as Paras Defence, Data Patterns, and MTAR Technologies saw declines of up to 9%. This reflects the market’s disappointment in the budget’s inability to provide a strong push for indigenous defence manufacturing.
Government’s Focus on ‘Make in India’
Despite the concerns, the government continues to emphasize domestic defence production. Defence Minister Rajnath Singh stated that 75% (₹1.1 lakh crore) of the capital modernization budget is earmarked for procurement through domestic sources. The Defence Research and Development Organisation (DRDO) received an increased budget of ₹26,817 crore, with ₹14,924 crore allocated for research and innovation.
Additionally, the Border Roads Organisation (BRO) was allocated ₹7,146 crore to enhance strategic infrastructure, including roads, tunnels, and bridges in sensitive border areas.
Where the Budget Falls Short
While India has made significant progress in defence self-reliance, with indigenous defence production touching ₹1.26 lakh crore and defence exports hitting ₹21,083 crore, the FY25 budget still leaves only 27.66% of the total defence budget for capital expenditure, while the majority is directed towards personnel and pension expenses.
Another critical gap is in R&D spending. India allocates only 1% of its defence budget to R&D, compared to 13% by the U.S.. This severely limits advancements in key areas such as hypersonic weapons, AI-driven defence systems, and quantum technologies. Defence experts warn that without significant investment in cutting-edge technology, India risks falling behind global military powers.
The Bigger Picture
While the budget continues to prioritize the middle class and rural development with tax exemptions and welfare schemes, defence analysts believe that a stronger military budget is crucial for India’s long-term security. With border tensions persisting and new geopolitical threats emerging, India needs an agile, forward-looking defence budget that prioritizes both modernization and research-driven innovation.
As things stand, the Defence Budget 2025 does not deliver the firepower India needs, leaving critical gaps that may impact the country’s defence preparedness in the years to come.
