Troubled times | Is India spending enough on defence preparedness?

India’s defence budget looks large, but real investment in lethal capacities remains inadequate

Wars have been radically transformed in the 21st century. The Russia-Ukraine war, now in its fourth year, and the Israel-US-led offensive against Iran engulfing West Asia, make it clear that wars are no longer fought primarily by armies on the ground. Instead, flying jets, missiles, and drones make the lethal difference.

Modern warfare demands massive investment in both offensive and defensive capabilities, and a fundamental shift in defence forces — from soldier-led formations to forces driven by jets, missiles, drones, radars and interceptors.

How is this expenditure changing India’s defence preparedness? Are we really funding its transformation into a modern war machine?

Defence expenditures static

India’s defence expenditure is classified under four heads: Defence (Civil), which covers support organisations such as the Border Roads Development Board (BRDB); Defence Services (Revenue), which funds pay and allowances; Capital Outlay on Defence Services, used for acquiring combat capabilities like fighter jets and naval fleets; and Defence Pensions, which provide pensions to ex-servicemen.

In 2024-2025, total defence expenditure stood at Rs 6.36 trillion, including Rs 1.58 trillion for pensions, Rs 3.19 trillion for establishment costs, and Rs 1.6 trillion for capital expenditures. Excluding pensions, the ‘real’ defence expenditure was Rs 4.78 trillion.

Following Operation Sindoor in May 2025, expectations were high that defence expenditure would substantially rise. Yet, the 2026-2027 Budget raised real defence expenditure for 2025-2026 to only Rs 5.63 trillion — an increase of about 18%, widely seen as insufficient.

The fine print revealed a bigger problem. The government provided Rs 361.31 billion in 2025-2026 for spectrum charges payable to its own telecommunication department — an expense not levied earlier, since defence spectrum was free. Adjusting for this, the effective increase in defence spending was barely 10% — far too inadequate given the worsening regional security scenario.

Defence shield expenditure hidden

Strengthening the air capabilities of India’s defence forces is reflected in expenditures on aircraft and aero-engines (including drones). This expenditure rose from Rs 486.14 billion in 2024-2025 to Rs 727.8 billion in 2025-2026, a welcome, hefty increase of ~50%.

The government also allocated Rs 316.31 billion in Budget 2025-2026 and Rs 98 billion in Budget 2026-2027 (a combined Rs 414.3 billion or ~$4.6 billion) under the Transfer to Technology in National Security Fund (TNSF) in the Finance Ministry (Department of Economic Affairs) budget — possibly linked to the S-400 system.

The Defence Procurement Board (DPB), on March 2, approved the purchase of five more S-400 air-defence systems from Russia. India purchased five in 2018, for about $5.4 billion. If the Rs 316.31 billion allocation is added to the 2025-2026 defence spending, it offsets the artificial increase caused by spectrum charges and restores defence expenditure growth to a more respectable 16%.

Yet, a critical question remains: why was this expenditure placed in the DEA budget rather than the defence capital budget, and why is payment being routed through a fund outside the defence accounts? Does this suggest a not-so-transparent practice in India’s procurement of Russian defence equipment?

Will India get much-needed fighter aircraft?

India’s decades-old efforts to develop an indigenous aero-engine (Kaveri) have made little progress, forcing reliance on foreign-made engines.

On September 25, the Ministry of Defence (MoD) signed a contract with the Hindustan Aeronautics Limited (HAL) for the supply of 97 Light Combat Aircraft (LCA) Mk1A Tejas to the Indian Air Force (IAF), worth Rs 623.7 billion (~$7 billion). The engines for these aircraft will be imported from General Electric (GE), USA.

In February 2021, the MoD also placed orders for 73 LCA Tejas Mk-1A fighters and 10 LCA Tejas Mk-1 trainers for Rs 456.96 billion (~$6.3 billion). HAL, in August 2021, placed orders for 99 F404 engines from GE for $716 million, and in November 2025, inked a $1 billion deal for another 113 engines.

Despite these commitments, Tejas deliveries are not progressing satisfactorily.

HAL was expected to begin supplying aircraft from the 2021 order in 2024, but has failed to do so. Although HAL claims five aircraft are ready, the IAF has not taken delivery for reasons that remain unclear. Matters worsened when a Tejas fighter jet crashed during the Dubai Air Show in November, raising further doubts.

While Tejas is touted as 64% indigenous and intended to advance India’s self-reliance, its induction is critical. Until then, India must continue to depend on foreign technology and aircraft.

Reflecting this reality, in April 2025, India signed a Rs 630 billion ($7.41 billion) deal with France for 26 Rafale jets in ready-to-fly condition. In February, it also decided in principle to procure another 114 Rafale jets at an estimated cost of Rs 3.25 trillion (~$40 billion). Though the Rafale’s price has been controversial, the IAF’s operational requirements must be met, albeit at a fair price.

Get the act together

It is clear that India urgently needs to increase defence expenditure, specifically on lethal capacities (jets, missiles, protection systems, etc.), while simultaneously resolving persistent issues in indigenous production and procurement. Delays are no longer an option.

Subhash Chandra Garg is former Finance & Economic Affairs Secretary, and author of ‘The Ten Trillion Dream Dented’, ‘Commentary on Budget 2025-2026’, and ‘We Also Make Policy’.

(Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.)