India's defence spending up 50% since 2020

Training guns on higher capex

India has seen a steady rise in defence allocation, with capex creation 50 percent higher from the pre-pandemic period, a Moneycontrol analysis of Budget data shows.

The compounded annual growth rate of defence capex was 9.1 percent between FY20 and FY25, compared with 6 percent between 2014-15 and 2019-20.

The government is likely to have spent Rs 1.72 lakh crore on defence capex in 2024-25, a 9.4 percent increase from Rs 1.57 lakh crore in the previous year.

Defence’s capex spending doubled in the 11 years the Modi government has been in power. This rise has contributed to a significant change in how defence spending is done.

The share of capex in total defence spending reached its highest level of 27.7 percent in 2024-25 compared with 25.2 percent in the previous fiscal and was higher than the 25.4 percent average between 2015-16 and 2023-24.

Defence’s share in GDP declines

While defence capex share has risen, the spending share in GDP has declined in the post-pandemic period.

Defence accounted for 2.3 percent of GDP until 2020-21 but declined to 2.1 percent between 2021-22 and 2024-25.

In 2024-25, the share of defence spending declined below 2 percent for the first time in more than a decade, as expenditure stood at Rs 6.2 lakh crore.

The government has set an ambitious target to more than treble the defence production to Rs 3 lakh crore by FY29 and raise exports to Rs 50,000 crore.

India was the fourth largest military spender in 2023, Stockholm International Peace Research Institute (SIPRI) data shows. India's spending was a tenth of the US, the top spender, and just about a fourth of China’s. In 2023, defence accounted for 1.2 percent of China’s military spending.