Surpassing the UK and Saudi Arabia, India has jumped up two spots to become the fourth largest country in military spending and defence budget in the world.
This comes after the Modi government increased the defence budget to 13.1% in 2016-17 fiscal year. This amounts to an increase to $50.7 bn. Procurement spending has been constrained in India over the last three years as personnel costs have increased.
Short-term pressures like bullet-proof jackets and the introduction of one rank, one pension (OROP) are being cited as the main reasons for the higher rate of growth in budget allocation to defence.
Even after increasing the budget, there are no significant procurement and acquisitions. However, the budget remained low as compared to 2013-14 fiscal year. This year, it is likely to rise up to 17-18%, expected to touch $60.8 bn by 2020.
Last year, India had 3.1% share of world military expenditure of the 15 states with the highest spending in 2015.
This lead to a rise in the military spending in Asia and Australia region by 5.4% in 2015 and 64% since 2006. China, by far had the highest military expenditure in the region of about $215 billion, or 49% of regional spending. India being the region’s second largest spender, is still four folds lesser than China.
Following this, India now ranks among the top 10 countries in the world in terms of its military expenditure and import of defence equipment. India allocates about 1.8% of its GDP to defence spending, of which 36% is assigned to capital acquisitions.
It may be noted that only 35% of equipment are manufactured domestically leading to a large import of raw material at both the system and sub-system levels.
Globally, the world military expenditure rose by 1% in 2015. This was the first increase in military spending since 2011, reflecting continuing growth in Asia and Oceania, Central and Eastern Europe, and some Middle Eastern states.
Russia and Saudi Arabia, however, are planning cuts in 2016. These were the countries with the 2nd and 3rd largest defence spending in the world. Cut in their budgets may see India rise in the global rankings of the defence budget.
However, what we expect to see from 2017 onwards is a military focused on modernization. India needs new equipment to fulfil its modernization drive. Over the next three years, India will re-emerge as a key growth market for defence suppliers.
