2025 defence budget analysis
This article is authored by Aleena T Sabu, research associate and Avani Prakash, research intern, Centre for Public Policy Research (CPPR), Kochi.
The Indian government in the past few years has focused on modernisation and self-dependency in the defence sector. With a 9.5% increase from the previous year, ₹6.81 lakh crore in 2025 and ₹6.22 lakh crore in 2024, fnance minister Nirmala Sitaraman has prioritised the defence sector by allocating the highest budget to the defence sector among the other ministries. This rise in the budget shows the government’s interest in strengthening the Indian military in the wake of the geopolitical and security scenario around the globe. The budget focuses on two important elements: Modernisation and self-reliance, modernisation in response to the tensions with China along the Line of Actual Control and border security issues with Pakistan and self-reliance for its vision of Atmanirbhar Bharat and production of defence supplies.
India’s defence budget has consistently increased, from ₹5.25 lakh crore in 2022-2023, ₹5.94 lakh crore in 2023-2024 and ₹6.22 lakh crore in 2024-2025, a total of 30% growth in three years. But at the same time, the modernisation budget saw only a 4.6% increase in the 2025 budget, which is almost 6% down from 2024-2025 and 6.5% in 2023-2024. While the capital outlay for almost ₹1.8 lakh crore has been allocated, an increase of ₹1.72 lakh crore from last year’s budget. The modernisation budget had been cut short from the previous years, while the capital outlays have been increased, giving importance to broader development of existing buildings, infrastructure and equipment.
One major focus of this budget is boosting domestic defence production, wherein 75% of capital procurement is allocated to local suppliers. This is to strengthen the private sector, drive research and development and is a sign of India’s commitment to self-reliance and reducing dependence on foreign arms suppliers.
Revenue expenditure for operational costs rose from ₹2.83 lakh crore to ₹3.11 lakh crore in 2024-2025, this expenditure covers salaries, training, logistics and maintenance costs. At the same time the defence pension has also increased to ₹1.6 lakh crore from last year’s ₹1.41 lakh crore due to the One Rank One Pension scheme and increasing number of retired personnel. This brings in an important question of personnel welfare and resource diversion, making it important for the government to reflect on its priority more, as modernisation and Atmanirbharta would require more funds.
The budget allocated for Innovations for Defence Excellence (iDEX) and Acing Development of Innovative Technologies (ADITI) Stand at 449.62 crore, this is allocated to promote defence innovation through startups. At the same time, the DRDO’s budget increased by 12.4% from last year’s ₹26,816 crore. In the contemporary scenario, where Artificial Intelligence, cyber Warfare and space-based defence is gaining importance, increased funding to research and development (R&D) is crucial as it will support India’s strategic goals. Although there is an increase in the R&D spending, India still lags behind global leaders like China and the United States, which raises concerns whether this allocation is sufficient to fill the technological gap.
Infrastructure development has remained a priority this year too, with the Border Roads Organisation allocating ₹7,146 crore to boost military movement in high-altitude regions in the Line of Actual Control and the Line of Control regions. This investment is crucial to improve connectivity to remote areas as it will enable faster troop deployment while also strengthening India’s defence posture. The allocation will also address the recent logistical difficulties, through strategic roads, bridges and tunnels in remote areas.
India’s defence budget spotlights the country's focus on military preparedness and indigenisation in defence production. Indian government’s investment in border infrastructure, R&D and domestic procurements align with long-term security goals, especially in the face of China’s growing Indo-Pacific Influence. The shift towards cyber warfare, automated weapons and space-based defence marks a transition to a technology-driven military. While there are still concerns over delayed procurement with almost ₹12,500 crores unspent last year, which raises questions about the efficiency of execution.
In conclusion, the 2025-26 budget focuses on a balanced approach, ensuring modernisation, personal welfare and operational efficiency. The government’s readiness for self-reliance, involvement of the private sector and investment for research and development are positive signs. But a check on the modest increase in capital outlay, rising pension costs can pull India backward from its vision of ensuring security in the neighbourhood. Efficient use of funds and adaptation of newer technologies will become vital for strengthening India’s defence posture and maintaining strategic stability in the region.
This article is authored by Aleena T Sabu, research associate and Avani Prakash, research intern, Centre for Public Policy Research (CPPR), Kochi.
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