India’s defence sector is undergoing a transformation, balancing fiscal prudence with the need for military modernisation and self-reliance. While the defence budget has grown in absolute terms, its share of GDP has fallen below 2% for the first time in over a decade, standing at ₹6.2 lakh crore in 2024-25. This reduction raises concerns about military preparedness and regional security challenges.
Despite this, the government is actively pushing for self-sufficiency in defence manufacturing. By FY29, it aims to increase domestic production to ₹3 lakh crore while expanding exports to ₹50,000 crore. However, India still faces critical last-mile dependencies in key defence technologies, advanced weapon systems and supply chain resilience. Addressing these gaps is crucial to achieving long-term strategic autonomy.
Current Defence Budget: Key Allocations and Trends
Although the total defence budget has increased, it has not kept pace with the overall economic expansion. The focus has shifted toward enhancing domestic manufacturing and reducing import dependency.
Major allocations in the 2025-26 Budget:
• Modernisation & Infrastructure: ₹1.8 lakh crore (+4.65%) for procurement and technological advancements.
• Operational & Personnel Expenses: ₹3.11 lakh crore (+10.24%) for salaries, logistics and training.
• Pension Payments: ₹1.61 lakh crore (+13.87%) covering retirees and One Rank One Pension (OROP) revisions.
• Defence R&D: ₹26,816.82 crore (+12.41%) to advance AI, robotics and space warfare.
• iDEX Programme: ₹449.62 crore, reflecting a threefold increase in two years for fostering defence innovation.
• Border Infrastructure: ₹7,146.50 crore (+9.74%) for key projects in Ladakh, Arunachal Pradesh, Jammu & Kashmir and Rajasthan.
While these allocations support domestic industry growth, they may not fully address India’s last-mile dependency on foreign suppliers for critical technologies.
Key areas of last-mile dependency in defence
Despite India’s push for self-reliance, it continues to rely on foreign suppliers for several strategic technologies and components:
1. Advanced Defence Technologies & Weapon Systems
• High-End Jet Engines: India depends on the U.S. (GE), France (Safran), and Russia for fighter jet engines.
• Electronic Warfare & Radars: Foreign collaborations remain essential for next-generation radar systems.
• Hypersonic & Long-Range Missiles: While BrahMos-II and Agni-V are progressing, full independence is yet to be achieved.
2. Semiconductor and AI Infrastructure
• Military-Grade Microprocessors: Used in fighter jets, missile guidance systems, and communication networks.
• AI & Quantum Computing for Defence: India’s ecosystem for AI-driven battlefield technology is still developing.
3. Advanced Materials & Metallurgy
• Stealth Coatings & Composite Materials: Essential for low-observable aircraft and warships.
• High-Strength Alloys: Critical for next-gen armoured vehicles and hypersonic weapons.
4. Maintenance, Repair and Overhaul (MRO) Dependencies
• Spare Parts & Software Upgrades: India relies on Russia, Israel, and the U.S. for key military spares and maintenance.
Strategic roadmap to reduce last-mile dependency
To transform India from a major arms importer to a self-reliant defence power, a multi-pronged strategy is essential.
1. Indigenous Development of Next-Gen Defence Technologies
• Boosting Domestic R&D Investment: Increasing DRDO’s budget and encouraging private-sector research in AI, space surveillance and quantum encryption.
• Accelerating the Defence Semiconductor & AI Mission: Establishing semiconductor fabs and AI-based defence applications.
2. Strengthening Private Sector Participation
• Encouraging Indian Defence Startups: Expanding initiatives like iDEX to support indigenous innovation.
• Strategic Public-Private Partnerships: Enabling technology transfer through joint ventures with global defense leaders.
3. Expanding Indigenous Production of Critical Systems
• Jet Engine Manufacturing: Accelerating Safran-HAL and GE-HAL collaborations for localised production.
• Stealth & Radar Technology: Investing in new-generation AESA radars and electromagnetic warfare systems.
4. Enhancing Supply Chain Resilience
• Reducing Foreign MRO Dependency: Establishing dedicated military repair and overhaul hubs.
• Localised Production of Spares: Increasing domestic manufacturing of critical components for fighter jets, submarines, and armored vehicles.
Security threats and the need for increased preparedness
The evolving security landscape necessitates greater investment in military readiness:
• China’s Infrastructure Expansion in Nepal: Poses strategic threats near the Siliguri Corridor.
• Border Tensions with Bangladesh & Myanmar: Increasing risks of infiltration and smuggling.
• Cyber Warfare & AI-Driven Conflicts: Demands higher investment in digital security and intelligence networks.
Key Areas of Military Strengthening:
• Force Expansion: Increasing the number of active personnel in the Army and Air Force.
• Modernisation of Equipment: Accelerating procurement of advanced fighter jets, missiles, and surveillance drones.
• Infrastructure Development: Strengthening border roads, logistics hubs, and rapid deployment facilities.
• R&D Investment: Enhancing DRDO funding for next-generation weapons and AI-based defense systems.
Recommendations for Future Defence Policy
• Increase Defence R&D Spending: Enhancing investments in AI, quantum computing, and hypersonic weapons.
• Strengthen Indigenous Production: Expanding private-sector participation and technology transfer programmes.
• Build a Resilient Supply Chain: Reducing foreign dependency in MRO and critical spare parts.
• Expand Military Readiness: Aligning force expansion and equipment modernisation with emerging threats.
A well-calibrated defence budget that prioritises self-reliance and technological advancement will be key to ensuring India’s long-term security and global military positioning
(The author is a globally recognised expert in defence and strategic affairs)