India is spending as much on defence as the West when we look at it as a percentage of GDP. But here’s the catch — we’re still far behind when it comes to capital investment in defence. And that’s a big deal.
In FY24 and FY25, just 24.9% of India’s total defence budget went into capital expenditure (capex). In comparison, the US spent 37% of its defence budget on capex. The UK spent a third, and the EU clocked 31%.
So even though India spends around 1.8% to 2% of GDP on defence — just like the UK and EU — the way we spend it is very different. We’re not putting enough into modernising weapons, tech, and infrastructure.
Capex vs GDP: India Falls Behind
Let’s break it down. In FY25:
- India’s defence capex was 0.49% of GDP.
- The EU was at 0.4% (lower than India).
- The UK hit 0.6%.
- The US? A solid 1%.
Worse, while the US has grown its capex from 0.92% to 1.04% of GDP since FY17, India has dropped from 0.56% to 0.49%. That’s not great news.
Same Structure for 8 Years
For the last eight years, capex has remained around just 25% of our total defence budget. That shows there’s been no serious shift in priorities. If India wants to be a global military power, this needs to change — fast.
A New Push in FY25
Defence Secretary RK Singh recently told CNBC-TV18 that India plans to raise defence spending from 1.9% to 2.5% of GDP. This comes at a time when many Western countries are also increasing their budgets due to rising threats around the world.
And here’s the good news:
- FY25 could be a turning point.
- Nearly 25% of defence production will now come from private players.
- The number of indigenised defence items has doubled to almost 14,000 in just two years.
- Startups are joining the game.
India is finally waking up to the need for more self-reliance and smarter defence investments.
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