Context
The 2026 report by the Stockholm International Peace Research Institute (SIPRI) indicates that India has become the fifth-largest military spender in the world, with the defense spending projected to hit a record of 92.1 billion dollars in 2025, an increment of 8.9 per cent compared to the prior year. This is second only to the US, China, Russia, and Germany, which highlights the increased emphasis on military modernization in India in the context of an increasing regional tension, especially following the 2025 border disputes.
Strategic Budgetary Allocations (2025–2027)
The defense expenditure in India has been on a steady rise with the ministry of defense being allocated the largest portion of all ministries.
- Budget 2026-27: A record ₹7.85 lakh crore ($93.5 billion) was allocated, a 15.19% jump from the previous year.
- Capital Outlay: 2.19 lakh crore are allocated towards new acquisitions, such as state of the art fighter jets, naval ships and missiles.
- Revenue Expenditure: Operational preparedness, salaries and daily sustenance come under over 3.11 lakh crore.
- Pensions: Defense pension budget increased to 1.61 lakh crore in 2025-26, which is a major cost in terms of manpower that is being consumed by around half of the total defense budget.
Movement to Self-Reliance (Aatmanirbhar Bharat)
One of the most significant changes in the Indian approach is the transition to one of the largest importers of arms moving to self-reliant producer and a new exporter.
- Domestic Reservation: 75 per cent. of the modernization budget (about 1.12 lakh crore) is allocated to domestic industries only in 2025-26.
- Defense Exports: Exports have hit an all-time high of ₹38,424 crore in FY 2025-26, which is a staggering 62.6% higher than the preceding year. The USA, France and Armenia are the top buyers.
- Innovation Ecosystem: Programs such as iDEX and ADITI have brought on board more than 600 startups and MSMEs to come up with indigenous solutions in AI, quantum technology, and robotics.
Factors Driving High Military Spending
- Regional Tensions (Two-Front Threat): The requirement to maintain strong defense against a modernized Chinese PLA along the LAC and continuing proxy wars with Pakistan requires high military preparedness.
- Modernization and Emergency Procurements: In the wake of the Operation Sindoor in May 2025, India has stepped-up procurements of surveillance drones, air defense systems, and precision-guided ammunition to keep abreast of the battle.
- Indigenous Manufacturing (Atmanirbhar Bharat): India is moving towards not depending on foreign imports but strengthening local production, and 75% of the capital acquisition budget is allocated to the local industries.
- Enhancing Nuclear Triad:The investments are increasing in terms of second strike capabilities such as commissioning advanced submarines like INS Aridaman.
Challenges Ahead
- Revenue to Capital Ratio: Capital expenditure is still bound by high pension burdens (OROP).
- Procurement Delays: Domestic projects such as fighter jet engines may create delays that are a threat to operational preparedness.
- High Import Dependency: India is the second-largest arms importer, despite having the program, Make in India.
Source: TOI
UPSC Prelims Practice Question
Q. With reference to the Stockholm International Peace Research Institute (SIPRI) 2026 report on global military expenditure, consider the following statements:
- India has surpassed Russia to become the third-largest military spender in the world.
- India’s defense budget for 2026-27 allocates more than 70% of its capital procurement budget to domestic industries.
- Military pensions currently account for the smallest portion of India’s total defense expenditure.
Which of the statements given above is/are correct?
A) 1 and 2 only
B) 2 only
C) 2 and 3 only
D) 1, 2, and 3
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