India’s Defence Budget 2025-26 has seen a 9.53% increase, reaching INR 681,210 crore (~USD 78.8 Bn). But what does this mean for modernisation, indigenous manufacturing, and military preparedness?
In this week’s Defence Mantra, Editor-in-Chief Nitin A. Gokhale breaks down the budget, explaining where the money is going and why fund utilisation is key.
The capital expenditure has increased to INR 180,000 crore (~USD 20.8 Bn), a 5% rise from last year. Key areas of investment include aircraft and aero engines (27% of capital outlay), naval fleet (14%), and R&D (1%). However, the real question is: Are these funds being spent efficiently?
A major concern is the under-utilisation of funds. Last year, 7% of the capital budget (~INR 12,500 crore) remained unspent, affecting critical modernisation programs. Despite a 13% increase in R&D funding, the sector has struggled to utilise previous allocations. Why is this happening, and how can the process – military bureaucracy – be streamlined?
Another key concern in the Defence Budget 2025-26 is the modest 2% increase in Naval Fleet allocation, despite India’s focus on strengthening maritime security.
However, as Nitin explains, defence procurement is a long-term process, and funds are not spent in one go but over several years as projects progress in phases.
Large-scale naval procurements, such as warships and submarines, require multi-year funding commitments, covering design, construction, trials, and commissioning. While the current budget may seem limited, it is part of a structured financial plan that ensures steady progress in modernisation efforts.
Beyond the numbers, policy reforms are shaping the future. The government has declared 2025 as the ‘Year of Reforms’ in Defence, signaling a push for efficiency, procurement transparency, and domestic production. Defence production has already grown 50% since 2021, and exports have surged 31 times in a decade.
Join us as Nitin A. Gokhale analyses the hits and misses of the budget, breaking down how each rupee is allocated and what it means for India’s military capabilities. Is this a smart budget or a missed opportunity?
