India Continues Military Spending Rise, Ranking 4th Globally

India has solidified its position as a significant military power, with the Stockholm International Peace Research Institute (SIPRI) identifying it as the world's fourth-largest military spender in 2023. India's defense expenditure climbed to an estimated $83.6 billion, representing a 4.2% increase compared to 2022.

This growth aligns with a concerning global trend – worldwide military spending reached an unprecedented high of $2.443 trillion in 2023. This marks a 7% increase from the previous year and the steepest annual rise since 2009.

Drivers of Military Spending​

SIPRI experts attribute the global surge in military expenditure to a deteriorating global security environment. The ongoing Russia-Ukraine conflict, along with heightened tensions throughout Asia, Oceania, and the Middle East, are fueling this upward trend.

India's longstanding border tensions and broader regional security concerns are seen as key motivations behind its rising defense budget. Of particular note is India's emphasis on domestic defense procurement, with a record 75% of capital outlays dedicated to locally produced arms in 2023.

Global Landscape​

The United States, China, and Russia remain the undisputed leaders in military spending. India, along with Saudi Arabia, completes the top five largest spenders in 2023, collectively accounting for 61% of total global military expenditure.

Implications and Reactions​

India's expanding military budget is likely to stimulate debate, both within the country and among international observers. Key discussion points will likely center on striking the optimal balance between military readiness, internal development initiatives, and ensuring transparency in defense spending.

Key Figures​

• India's Military Spending (2023): $83.6 billion
• Increase from 2022: 4.2%
• Global Military Spending (2023): $2.443 trillion
• World Military Burden (Percentage of Global GDP): 2.3%

 

[ASHOK CARROL]

With good GDP growth rates and economy on a fast track , the next budget must increase the defense budget to over 100$ Billion ayear.

 

[Anant]

With good GDP growth rates and economy on a fast track , the next budget must increase the defense budget to over 100$ Billion ayear.

Won't happen, Sir. A 100 billion USD per year defence budget is achievable in another 4-5 years, but not next year. Not unless the post-election budget sees some massive boost to spending.

 

[Pramkumar]

India's GDP and its threads level the spending must be in the range of USD 125-130 Billiion now and in next 5 years it should be around USD 150 billion and by 2037 it must be USD 200+ billions

 

[desigandu]

Not enough...We should quickly get to $100B by 2025, and at least $150B by 2030 (say GDP $7T, so slightly over 2% of GDP)...Long term goal by 2035 should be about 2.5% of GDP...Also the focus should be on technological capability enhancements, as compared to just more people...Yes, it will be hard given government revenues, but it can be done with a focus on Atma Nirbharta, hitech manufacturing, jobs, private sector investments, and potentially exports.

 

[desigandu]

Won't happen, Sir. A 100 billion USD per year defence budget is achievable in another 4-5 years, but not next year. Not unless the post-election budget sees some massive boost to spending.

Agree, but that is where the Government (needs a clear law) wherein National Security Strategy (every 2 years) is spelt out (partially in the public domain) tied to spending and long term capability development...Yes, GOI funds are limited and there are a lot of competing priorities, but we must emphasize National Security and Defense...

 

[Rinku Pandey]

With good GDP growth rates and economy on a fast track , the next budget must increase the defense budget to over 100$ Billion ayear.

You are hoping for 25% increase in defence budget? Not happening.

 

[Anant]

Not enough...We should quickly get to $100B by 2025, and at least $150B by 2030 (say GDP $7T, so slightly over 2% of GDP)...Long term goal by 2035 should be about 2.5% of GDP...Also the focus should be on technological capability enhancements, as compared to just more people...Yes, it will be hard given government revenues, but it can be done with a focus on Atma Nirbharta, hitech manufacturing, jobs, private sector investments, and potentially exports.

Noting this again, Sir: A 2.5% or 3% GDP target for India for defence spending is not feasible at the present as it for Western economies. The simple reason for that is that our tax revenue to GDP ratio, and by extension the central government expenditure to GDP ratio, is far lower than that of Western economies.

For us, this year, the overall government budget is Rs. 47,65,768 crores, which is about 571.5 billion USD. The GDP this year is projected to be roughly 4 trillion dollars, which works out to a ratio of roughly 14.25%. In this, our defence spending is Rs. 621.54 lakh crore (as per the interim budget), which works out to about 74.53 billion USD. That means defence spending already accounts for 13% of overall central government spending, and is just under 2% of GDP. For us to reach 2.5%, defence spending would, as a proportion of overall government expenditure, have to rise to over 20%, which simply isn't sustainable long-term.

No, the way for us to reach 2.5% or 3% of GDP spending on the military is by improving the government's revenue to GDP ratio, which will therefore mean a larger budget, and by extension, a larger defence budget. In the present scenario, it simply isn't feasible.

 

[Anant]

India's GDP and its threads level the spending must be in the range of USD 125-130 Billiion now and in next 5 years it should be around USD 150 billion and by 2037 it must be USD 200+ billions

I also assume you have the 50 billion USD or thereabouts just lying around? Defence spending is, as of this year, around 13% of central government expenditure. There really isn't any headroom for increasing it further unless you cut funding elsewhere or borrow more. Neither of those options is particularly appealing.

You have to consider the fact that India's government expenditure to GDP ratio is very low (around 14.25% this year). Most Western economies have this ratio in the high twenties or low thirties of percent. Essentially, they can spend 2.5% or even 3% of their GDP on the military and only have it account for 10% or thereabouts of government spending. For us to hit 3%, that would mean a fifth of central government spending into defence, which isn't sustainable.

We presently need to focus on increasing the government's revenues, which means a larger budget, and by extension, a larger defence budget.

 

[Anant]

Agree, but that is where the Government (needs a clear law) wherein National Security Strategy (every 2 years) is spelt out (partially in the public domain) tied to spending and long term capability development...Yes, GOI funds are limited and there are a lot of competing priorities, but we must emphasize National Security and Defense...

We should be doing the entire National Security Strategy. That much is long overdue. However, when it comes to the point about prioritisation of funding, I would say we should, for the moment, anchor the defence budget to a percentage of central government spending rather than GDP, and ensure the rest (such as investments into infrastructure) are used which will boost the national economy and bring in more money.

 

[beencensured]

You are hoping for 25% increase in defence budget? Not happening.

It is a possibility in war economy.

 

[desigandu]

Noting this again, Sir: A 2.5% or 3% GDP target for India for defence spending is not feasible at the present as it for Western economies. The simple reason for that is that our tax revenue to GDP ratio, and by extension the central government expenditure to GDP ratio, is far lower than that of Western economies.

For us, this year, the overall government budget is Rs. 47,65,768 crores, which is about 571.5 billion USD. The GDP this year is projected to be roughly 4 trillion dollars, which works out to a ratio of roughly 14.25%. In this, our defence spending is Rs. 621.54 lakh crore (as per the interim budget), which works out to about 74.53 billion USD. That means defence spending already accounts for 13% of overall central government spending, and is just under 2% of GDP. For us to reach 2.5%, defence spending would, as a proportion of overall government expenditure, have to rise to over 20%, which simply isn't sustainable long-term.

No, the way for us to reach 2.5% or 3% of GDP spending on the military is by improving the government's revenue to GDP ratio, which will therefore mean a larger budget, and by extension, a larger defence budget. In the present scenario, it simply isn't feasible.

I agree...India's tax base is low and there are not many taxpayers, as most people don't make enough money to pay income taxes (though getting better), unlike the OECD (which are either heavily taxed and/or have a large GDP/capita; also there are not many countries that are big in the OECD that come close to 3% except the US and Poland. Baltics but they are tiny)...Given India's growth needs and the aspirations of the people even if India's per capita goes up to $10000, say by 2040, GOI revenues are still projected to be about $2-2.5T and thus will be on the lower side...One way to get large revenues without affecting investment is high GST (which is used well in Europe, though in my opinion very high) except on basic food, clothes etc...another option is to heavily tax services but compliance could be an issue...It is a vexing problem, and even if you look at China their tax base is lower % wise to OECD...Nevertheless, we need a larger budget (without much deficit) overall which will spur a larger defense budget, and given our land and sea borders we cannot do with a smaller military, whilst just focussing on hitech capability...another option is getting bigger bang for the buck via atma nirbharta., which is at least 10 years away.

 

[Anant]

I agree...India's tax base is low and there are not many taxpayers, as most people don't make enough money to pay income taxes (though getting better), unlike the OECD (which are either heavily taxed and/or have a large GDP/capita; also there are not many countries that are big in the OECD that come close to 3% except the US and Poland. Baltics but they are tiny)...Given India's growth needs and the aspirations of the people even if India's per capita goes up to $10000, say by 2040, GOI revenues are still projected to be about $2-2.5T and thus will be on the lower side...One way to get large revenues without affecting investment is high GST (which is used well in Europe, though in my opinion very high) except on basic food, clothes etc...another option is to heavily tax services but compliance could be an issue...It is a vexing problem, and even if you look at China their tax base is lower % wise to OECD...Nevertheless, we need a larger budget (without much deficit) overall which will spur a larger defense budget, and given our land and sea borders we cannot do with a smaller military, whilst just focussing on hitech capability...another option is getting bigger bang for the buck via atma nirbharta., which is at least 10 years away.

Agreed, Sir. Oh, and most services already attract 18% GST, so you can't increase that much beyond the present rate before it becomes top contentious. As it is, a lot of people feel it should have been in the 12% bracket.

 

[Anant]

It is a possibility in war economy.

Do we have a war economy? Does it look like we will have a war economy in the next 3 months? The answer to both those questions is a resounding "No". I rest my case.