India's defence budget for 2025-26 reflects a persistent structural imbalance, with 68.5% of the ₹6.81 lakh crore allocation consumed by manpower-related expenses (salaries, pensions, and operational costs), leaving limited funds for modernization. This comes amid calls for increased spending to counter China's military rise and address critical equipment shortages.

Key Budget Breakdown

Manpower Costs:

₹3.11 lakh crore for revenue expenditure (salaries, maintenance)

₹1.6 lakh crore for pensions

Combined total: ₹4.71 lakh crore (68.5% of total defence budget)

Modernisation:

₹1.8 lakh crore capital outlay (26.4% of total)

Represents only a 4.6% increase from 2024-25, insufficient to address operational gaps

Structural Challenges

1. GDP Allocation Stagnation:

At 1.9% of GDP, defence spending remains below the 2.5-3% recommended by experts to address dual threats from China and Pakistan. For comparison, China spends ~1.6x India's defence budget annually.

2. Legacy Pension Burden:

Despite the Agniveer scheme (aimed at reducing long-term pension liabilities), legacy pension obligations continue to consume 23.5% of the total budget.

3. Procurement Delays:

₹12,500 crore from 2024-25's capital budget remained unspent due to bureaucratic delays, highlighting systemic inefficiencies. Critical shortages persist in submarines, air defence systems, and night-fighting capabilities.

Expert Perspectives

Amit Cowshish (Former MoD Financial Advisor):

"Pensions and salaries consume a substantial portion... this trend persists despite reform attempts".

Laxman Behera (JNU Professor):

Advocates increasing defence spending to 2.5% of GDP within five years and achieving a 60:40 revenue-capital expenditure ratio.

Modernisation Priorities

The ₹1.8 lakh crore capital outlay focuses on:

Indigenous procurement (75% earmarked for domestic suppliers)

Mega projects including Rafale-M fighters (₹63,000 crore), Scorpene submarines (₹38,000 crore), and Prachand helicopters (₹53,000 crore).

However, analysts note even these allocations may be inadequate given the ₹4.2 lakh crore pipeline of approved projects awaiting funding. The budgetary constraints underscore the need for deeper reforms in defence planning and expenditure rationalization to balance immediate manpower needs with long-term strategic modernization goals.

The budget reflects India’s struggle to balance immediate personnel costs with long-term modernization goals amid border tensions with China. While domestic procurement initiatives aim to boost self-reliance, analysts argue steeper capital expenditure hikes are essential to counter China’s military advancements. Without reforms to curb manpower costs, India risks lagging in critical areas like drone warfare, cyber capabilities, and next-gen equipment.

Reuters