India's Defence Economy
Inside India's Defence Budget
How much India spends on defence, how the budget splits between salaries, pensions and new equipment, and how it compares with other countries.
India has one of the world’s largest defence budgets.
The size
India’s defence budget for 2025-26 was around 6.8 lakh crore rupees, among the largest items in the Union Budget. Global trackers like SIPRI rank India among the top five military spenders in the world.
As a share of GDP
Defence spending has been roughly 2 percent of GDP in recent years, lower than in some past decades.
How it’s split
- Revenue spending: salaries, operations, maintenance and fuel.
- Capital spending: new equipment like aircraft, ships and tanks, typically around a quarter of the total.
- Pensions: a large and growing separate share.
The trade-off
Every rupee spent on defence could be used for health, education or infrastructure. Economists call this the guns versus butter trade-off, but security is also a public good that supports the economy.
Comparisons
- The United States spends far more than any other country.
- China spends several times what India spends.
- Pakistan spends much less in absolute terms but a similar or higher share of its smaller GDP.
Of every 100 rupees in India's defence budget, a large portion pays salaries and pensions, while only about a quarter goes to buying new equipment. This limits modernisation.
Salaries, pensions and running costs take the majority.
- India's defence budget was around 6.8 lakh crore rupees in 2025-26.
- It is about 2 percent of GDP.
- Capital spending on new equipment is around a quarter.
- Defence spending involves trade-offs with other priorities.
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