Military funding merits long-term planning

THE Indian defence budget announced for 2026-27 has been broadly welcomed by the armed forces and the industry. Defence allocation, at Rs 7.85 lakh crore, has increased by 15.19% over the previous year’s estimates of Rs 6.81 lakh crore. In a push for modernisation, the capital budget is almost 22% higher than last year, with 75% spending earmarked for the domestic defence industry.

Approximately 20% of the total defence budget is earmarked for revenue expenditure on sustenance and operational preparedness. Although revenue expenditure is often viewed as not contributing to modernisation, it is critical to ensure the readiness of forces deployed on our unsettled borders and in the maritime spaces that are vital for India’s economic growth.

While the government’s focus on national security is clear, we must ask the larger question: how is defence spending contributing to the development of our military power? This question is important because we often equate military capability with inputs, assuming that higher defence spending automatically translates into better capability. While budgets matter, outputs are the real measure — what is our readiness status today? And there are some concerns here.

The Indian Air Force (IAF) is down to 29 squadrons, the lowest figure since the 1960s. A total of 180 Tejas Mk1A are on order, but deliveries have not yet commenced. Media reports indicate that some pending issues remain before the IAF can accept the aircraft, but assuming these are resolved, the delivery of 180 aircraft will be completed by 2033.

The government has approved a deal to procure 114 Rafale fighter aircraft at a cost of about $36 billion. Eighteen aircraft will be procured in fly-away condition from France, and 96 are to be manufactured in India with 60% indigenous content. Considering the current backlog of orders with Dassault Aviation, the first aircraft is likely to arrive in India after three years.

The shortfall in air-to-air refuellers will be made up by converting six second-hand Boeing 767 airframes into tankers by Israel Aerospace Industries, in partnership with Hindustan Aeronautics Limited. Also approved are six additional Airborne Early Warning & Control Systems, based on the Embraer aircraft. Both these projects are likely to see completion by 2032.

There is justifiable pride in the Indian Navy’s indigenous shipbuilding capacity. Project 17A, which aims to equip the Navy with seven advanced stealth frigates, is on track with four frigates commissioned and the remaining three to be delivered this year. Project 15B, which was to provide the Navy with four stealth guided-missile destroyers, was completed in 2025.

The challenge before the Navy is the induction of a new class of frigates and destroyers. Project 17B, the next-generation frigates, was approved in 2024, but the Request for Proposal has yet to be issued. Project 18, the next-generation destroyers, is in an advanced planning stage, but formal approval is pending. Therefore, it appears unlikely that any new frigate or destroyer will be inducted into the Navy in the next five years.

There is a similar situation with Project 75I for six advanced diesel-electric submarines with Air-Independent Propulsion technology. Approved in 2019, the project is in advanced negotiations, and the first submarine is expected to be commissioned in 2032.

The Army is also seeking replacements for its existing infantry fighting vehicles and battle tanks. Both projects have experienced numerous delays, and the earliest induction is unlikely before 2030. Due to delays in the procurement of new equipment, the Army has initiated projects to upgrade existing infantry fighting vehicles, air defence guns and artillery.

India ranks among the top five spenders globally on defence. There are voices in India’s security establishment that regularly call for increasing the defence budget to at least 2.5% of the GDP, up from the current 2%. However, the central challenge is not the amount of funds, but the effectiveness of the ecosystem and processes that support military capability development. In this regard, three recommendations are made.

First, the military must be funded in accordance with a long-term plan. Each service prepares a 10-year Integrated Capability Development Plan (ICDP) that the Chief of Defence Staff harmonises. The ICDP is approved by the Defence Acquisition Council in the Ministry of Defence. However, since there is no approval of this plan by the Ministry of Finance, annual budgetary allocations reflect funding for annual requirements rather than a long-term plan. The government must approve the ICDP and ensure a regular flow of funds to ensure its completion.

One problem plaguing the modernisation of the military is that decision-making is hesitant and personalised. There are numerous examples, from fighter aircraft to submarines to tanks, which took decades from initiation to approval. A well-defined long-term capability plan can help mitigate this problem by making decisions more structured, predictable and institutionally anchored.

Second, the procurement process requires structural reform. While some corrective steps have been taken, including updated acquisition manuals, the underlying culture remains overly compliance-driven, procedurally cumbersome and risk-averse. As Defence Secretary Rajesh Kumar Singh observed in June 2025, the real bottleneck is the acquisition cycle itself, with the purchase of weapon systems stretching five to six years. Such delays mean that systems risk obsolescence by the time they enter service and also undermine private-sector participation, since firms wait for years with no clear idea of orders.

Third, India must invest more in research and development (R&D). India’s spending on R&D is about 0.65% of the GDP, well below the global average of 2%. Roughly two-thirds of R&D funding comes from the public sector, with the private sector contributing the balance. In most advanced economies, the situation is reversed, with private industry accounting for the bulk of R&D spending. Under-investment in R&D has left India import-dependent on critical technologies.

The real challenge facing India is not about how much it spends on defence, but how it converts resources into usable combat power. That will require reform in procurement, greater investment in critical technologies and a stronger alignment between long-term planning and execution. Otherwise, India will continue to spend heavily while remaining short of the military capability its strategic ambitions demand.