A military budget (or military expenditure), also known as a defence budget, is the amount of financial resources dedicated by a state to raising and maintaining armed forces or other methods essential for defence purposes. Military budgets often reflect how strongly a country perceives the likelihood of threats against it or the amount of aggression it wishes to display. It also gives an idea of how much financing should be provided for the upcoming fiscal year. The size of a budget also reflects the country’s ability to fund military activities.

Among the countries maintaining some of the world’s largest military budgets, China, France, Germany, Japan, Russia, the United Kingdom and the United States are frequently recognized to be great powers. According to the list published by the International Institute for Strategic Studies (IISS), India ranks 5th in military spending.


Modernisation of armed forces is based on threat perception, technological changes and resources allocation. However, the budgetary allocations have been inadequate to serve the needs of armed forces. India has had the unique distinction of being the largest importer of defence equipment in the world for the past few years. If India is looking at self-reliance through manufacturing in any defence sector, the government needs to invest much more than usual to achieve it.

India has grand intentions of self-reliance in defence manufacturing and has aligned its procurement procedures accordingly. This is not just with the vision of arguably being a regional superpower, but also with the intent of creating jobs and making India a manufacturing hub for all types of defence equipment for consumption and export. The investment thus made in defence manufacturing will benefit not only the Armed Forces but the nation as a whole.


Military Expenditure in India averaged 20080.49 USD Million from 1956 until 2017, reaching an all-time high of 59757.10 USD Million in 2017 and a record low of 2590.70 USD Million in 1956. In the 2018-19 Union Budget, the amount of Rs 2.95 lakh crore works out to around 1.58% of India’s Gross Domestic Product (GDP). The last time the share of defence in the GDP was lower than this was in the 1962 Union Budget when a war had broken out between India and China in October. India is a growing superpower which is surrounded by arch-rivals Pakistan in the west and China in the north. In addition to this, India has to fighter terrorism and insurgency, so defence Budget must fulfil all the needs of our defence forces

The lion’s share of the budget is always taken up by revenue expenditure and the balance is left for capital acquisition. With the implementation of the 7th Central Pay Commission (CPC) and One Rank One Pay (Orop), revenue expenditure in the past couple of years has gone up, leaving little for capital expenditure. That means that only 3.6% of the defence budget is available for the modernization of all three Armed Forces for an entire year.

While India’s defence budget is now the fourth largest in the world,  it needs to address the issue of under-utilisation of the capital budget. As per the estimates, approximately Rs.7,000 crore worth of the capital budget is being underutilised. Hence India’s defence budget suffers from not only under-allocation but also under-utilization.

  • The Indian Armed Forces (especially the Indian Army) is too person-heavy and needs some force rationalization. Even China decided to reduce its troop size by 300,000 people in 2015.
  • Apart from this, the defence ministry needs to urgently follow the railway ministry in adopting accrual accounting.
  • It is evident that the true pension liabilities of the Indian Armed Forces are unknown.
  • Therefore the Armed Forces need a good calculation of their assets and liabilities to be prepared for future conflict
  • The Budget 2018-19 informs us of defence production corridors being created. They will definitely help in indigenisation of defence equipment. Many more such manufacturing corridors should be set up
  • Emphasis should be laid on a private entry in defence production by helping them set up their production units. Budgetary allocation for private players can help in bringing new technology and innovation in defence production.
  • The ministry should urgently address the issue of under utilisation. Proper utilisation and allocation of the budget resources among the armed forces will greatly increase the capabilities of our armed forces.
  • The need of the hour is long-term planning for modernisation and to supplement it with committed funding. In the 1980’s the defence plan was supplemented with matching allocation of resources, resulting in achievement of planned targets.
  • The policymakers have to get rid of ‘casual’ approach in budgetary allocations and have to be on the same page with the armed forces requirement and its allocations.
  • The shetkar committee has recommended a roll-on defence budget to have enough capital expenditure available for modernisation as against the present practice of surrendering unspent capital budget at the end of each financial year.

To overcome the challenge of underutilization of the Budget Estimates and ever-increasing Revenue Expenditure induced stress, we need to tackle it through structural reforms. It is now for the civil and military leadership of this country to introspect and review the existing structures, strengths, systems and procedures to overcome these existing formidable barriers hindering modernization.