India’s Defense Budget 2025-26: Strengthening Strategic Autonomy and Advancing Self-Reliance in Military Capabilities

By: Dr. Nishakant Ojha, a globally recognized expert in defense and strategic affairs, provides in-depth analysis of India's defense budget, highlighting its impact on national security and fiscal priorities.

Achieving Self-Reliance in Defense Amid Budget Constraints and Emerging Security Threats. As of February 2, 2025, India has allocated ₹6.81 lakh crore for its defense budget for the fiscal year 2025-26, reflecting a 9.5% increase over the previous year's initial estimates. This expenditure accounts for around 1.9% of the projected GDP for 2025-26."India strategically balances fiscal discipline and defense priorities, maintaining a robust security framework with a defense budget close to 2% of GDP."

Declining Defense Spending and the Shift Toward Self-Reliance

India's defense expenditure, which once consistently hovered around 2.3% of GDP, has seen a gradual decline in recent years. Between 2021-22 and 2024-25, this figure reduced to 2.1%, and for the first time in over a decade, it dropped below 2% in 2024-25. With the total allocation standing at ₹6.2 lakh crore, concerns have emerged regarding military preparedness and regional security.

Despite this, the government is actively pushing for self-sufficiency in defense 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 defense technologies, advanced weapon systems, and supply chain resilience. Addressing these gaps is crucial to achieving long-term strategic autonomy.

Introduction: Balancing Fiscal Constraints and Strategic Autonomy

India's defense sector is undergoing a transformation, balancing fiscal prudence with the need for military modernization and self-reliance. While the defense 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 defense 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 defense technologies, advanced weapon systems, and supply chain resilience. Addressing these gaps is crucial to achieving long-term strategic autonomy.

Current Defense Budget: Key Allocations and Trends

Although the total defense 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:

• Modernization & 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.
• Defense R&D: ₹26,816.82 crore (+12.41%) to advance AI, robotics, and space warfare.
• iDEX Program: ₹449.62 crore, reflecting a threefold increase in two years for fostering defense 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 Defense

Despite India's push for self-reliance, it continues to rely on foreign suppliers for several strategic technologies and components:

1. Advanced Defense 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 Defense: 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 armored 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 defense power, a multi-pronged strategy is essential.

1. Indigenous Development of Next-Gen Defense Technologies

• Boosting Domestic R&D Investment: Increasing DRDO's budget and encouraging private-sector research in AI, space surveillance, and quantum encryption.
• Accelerating the Defense Semiconductor & AI Mission: Establishing semiconductor fabs and AI-based defense applications.

2. Strengthening Private Sector Participation

• Encouraging Indian Defense 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 localized 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.
• Localized 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.
• Modernization 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.

Conclusion: Aligning Budgetary Priorities with Long-Term Strategic Goals

India's declining defense spending as a share of GDP highlights the need for a recalibrated approach. While self-reliance initiatives are progressing, addressing last-mile dependency in key technologies is crucial for strategic autonomy.

Recommendations for Future Defense Policy:

• Increase Defense R&D Spending: Enhancing investments in AI, quantum computing, and hypersonic weapons.
• Strengthen Indigenous Production: Expanding private-sector participation and technology transfer programs.
• Build a Resilient Supply Chain: Reducing foreign dependency in MRO and critical spare parts.
• Expand Military Readiness: Aligning force expansion and equipment modernization with emerging threats.

A well-calibrated defense budget that prioritizes self-reliance and technological advancement will be key to ensuring India's long-term security and global military positioning