Context

• India’s latest defence budget represents a notable shift after years of stagnation, marking the first sustained double-digit increase in allocation and reaching 2% of GDP.
• In an unstable global environment, this increase signals strategic intent and a renewed emphasis on preparedness.
• However, higher spending alone does not guarantee improved outcomes.
• The real test lies in whether the allocation can translate into faster acquisition, stronger domestic capacity, and long-term capability through systemic reform rather than incremental adjustment.

Key Feature of the Budget Regarding the Defence

• A key feature of the budget is the renewed focus on modernisation, particularly through a significant rise in capital expenditure.
• This shift corrects years of imbalance in which revenue expenses dominated at the cost of future readiness.
• The Indian Air Force and Army benefit from substantial increases aimed at platforms, heavy vehicles, and weapons, strengthening operational credibility across multiple theatres.
• At the same time, the weakened currency reduces the purchasing power of these allocations, especially for imported systems, partially offsetting the headline gains.

The Good and the Bad

• The emphasis on domestic manufacturing is reinforced by reserving a large share of acquisition spending for local firms, further advancing indigenisation.
• Defence exports have expanded rapidly over the past decade, reflecting growing industrial competence and policy continuity.
• This progress shows that domestic production is no longer aspirational but achievable.
• However, not all services benefit equally. Despite its expanding role in the Indian Ocean, the Navy receives a comparatively modest increase, largely because of its ability to absorb funds efficiently.
• This exposes a paradox in allocation logic, where institutional efficiency may unintentionally constrain future growth.
• Another structural issue is the continued burden of pensions, which consume a substantial share of overall spending.
• Historically treated separately, their inclusion today limits flexibility and distorts comparisons with earlier periods when defence allocations were significantly higher as a share of GDP. 

Bureaucracy and Delays

• Beyond allocations, entrenched bureaucracy remains a central obstacle. Procurement procedures, particularly cost-focused procurement norms, favour established firms and disadvantage smaller players critical for innovation in a technology-driven sector.
• Without assured demand, predictable timelines, and long-term planning, private participation remains constrained.
• Chronic delays in major acquisition programmes further weaken outcomes.
• Projects approved decades ago continue to face shifting timelines, eroding deterrence and forcing repeated extensions of legacy platforms.
• These delays also result in underutilisation of allocated funds, with large sums returning unspent at the end of the fiscal year.
• The absence of a non-lapsable modernisation fund compounds this problem, allowing short-term fiscal convenience to override sustained capability development.

Challenges and the Way Ahead: R&D Lies Scattered

• Investment in R&D has increased, but research remains fragmented and poorly integrated with production and deployment.
• Despite the dual-use nature of many technologies, translation into operational advantage is limited.
• Overall spending on research remains low compared to global peers, and private-sector participation is minimal.
• Without unified direction and stronger collaboration with industry, incremental funding increases are unlikely to yield transformative results.
• The broader conceptual challenge lies in how defence spending is perceived.
• Framed narrowly as a trade-off against welfare, its wider contribution to infrastructure, employment, and growth is often overlooked.
• Programmes such as border connectivity and indigenous shipbuilding demonstrate strong multiplier effects across the economy, supporting long-term development alongside security. 

Conclusion

• The current budget reflects ambition and improved prioritisation, but outcomes will depend on execution.
• Aligning spending with industrial capacity, accelerating decision-making, integrating research, and revisiting outdated financial structures are essential.
• If pursued seriously, these changes can convert higher allocations into durable strength, reinforcing national autonomy in an increasingly contested world.