India to spend 12.9% of Budget 2024 on defence. But how does it stack up against China?  

On Tuesday, Finance Minister Nirmala Sitharaman unveiled the Union Budget.

The Centre has allocated around Rs 6.21 lakh crore ($75 billion) for defence this year.

That’s up from 5.94 lakh crore ($72.6 billion) in 2023.

But what do we know about India’s defence spending? How does it measure up against China?

Let’s take a closer look:

What do we know about India’s defence spending?

India is spending 12.9 per cent of its total budget for the financial year 2024-25 on the defence sector.

The capital outlay has been pegged at Rs 1,72,000 crore.

Spending on defence has increased 4.79 per cent from the previous fiscal year.

As per News9, India has earmarked nearly a third of its budget (27.67 per cent) for capital expenditure.

This includes acquiring new weapons and systems such as fighter aircraft, ships, submarines, unmanned aerial vehicles, and specialist vehicles, as per Financial Express.

Another 14.82 per cent is allocated to revenue expenditure regarding operational readiness.

Pay and allowances account for 30.68 per cent of the budget while defence pensions take up 22.72 per cent.

Finally, 4.11 per cent has been allocated for civil organisations under the Ministry of Defence.

As per Financial Express, the budget has kept aside Rs 92,088 crore for sustenance and operational readiness.

This is a 48 per cent increase from previous fiscal.

The defence ministry has kept aside Rs 1.05 lakh crore – 75 per cent of the modernisation budget – to buy from Indian firms.

The Centre has also enhanced the allotment for its Ex-Servicemen Contributory Health Scheme (ECHS) to Rs 6,968 crore.

This is a 28 per cent rise from the previous fiscal.

Rs 6,500 crore was earmarked for the Border Roads Organisation – a 30 per cent hike from the previous fiscal and a 160 per cent spike since FY 2021-22.

The BRO will use these funds to execute key projects such as the Nyoma Airfield in Ladakh and strategic tunnels in Himachal Pradesh and Arunachal Pradesh.

The Centre also increased the defence pension budget to Rs 1.41 lakh crore – a 2.17 per cent increase from the previous fiscal, as per Financial Express.

India last year spent over 25 per cent of its defence budget on pensions in the previous fiscal, as per Bloomberg.

Defence Minister Rajnath Singh thanked Sitharaman. He said the budget would give a boost to self-reliance.

“As far as the allocation to the Ministry of Defence is concerned, I thank Finance Minister Nirmala Sitharaman for giving the highest allocation to the tune of Rs 6,21,940.85 crore, which is 12.9 per cent of the total budget of the government for 2024-25,” Singh wrote on X.

“The capital outlay of Rs 1,72,000 crore will further strengthen the capabilities of Armed Forces. Earmarking of Rs 1,05,518.43 crore for domestic capital procurement will provide further impetus to Atmanibharta,” he said.

“I am pleased that Border Roads have been given 30 per cent increase in allocation over the last budget under the capital head. This allocation of Rs 6,500 crore to BRO will further accelerate our border infrastructure,” Singh added.

To boost the startup ecosystem in defence industries, Rs 518 crore has been allocated to the iDEX scheme to fund technological solutions given by startups, MSMEs and innovators, Singh said.

How does it measure up against China?

New Delhi’s defence allocation is less than a third of what Beijing spends.

According to the state-owned Global Times, China spent around $224 billion on defence in 2023.

China usually allots around two per cent of its GDP to defence spending, as per CSIS.

China in in 2024 officially hiked its spending on defence to $231 billion.

That’s a 7.2 per cent from the previous fiscal – and its highest allocation in five years.

But experts say that the real number China spends on defence could be far higher.

For example, Beijing officially said it spent around $230 billion in 2022.

But the Stockholm International Peace Research Institute (SIPRI), for example, pegged the 2022 number at $292 billion.

Meanwhile, the International Institute for Strategic Studies (IISS) estimated the defence outlay at $319 billion.

_India Today q_uoted the American Enterprise Institute (AEI), a Washington-based think-tank as saying Beijing could actually be spending as much as $710.6 billion on defence every year.

The outlet quoted Mackenzie Eaglen, senior fellow at the AEI, as saying that the official budget is inaccurate.

Eaglen added that it does not properly reflect the massive arms build up and modernization of the People’s Liberation Army.

“China’s self-reported military budget, which comes directly from the Chinese Communist Party, is no more than a lone topline figure released through state media each year,” Eaglen wrote for Politico.

“Many experts believe China’s public defense budget does not include other military relevant expenses such as space activities, construction, and research. China’s state-sanctioned practice of military-civil fusion further blurs the lines between military and commercial investments, resulting in spending on combat power and paramilitary forces that is hidden within civilian ministries.”

Across the world, China and the US are the two biggest spenders when it comes to defence.

The United States last year spent $858 billion on defence.

A 2022 SIPRI report stated that the two superpowers accounted for over half the world’s total defence spending.

The report pegged India at fourth place behind them and Russia.

China’s Xi Jinping who has pumped billions into buying and developing equipment as part of a modernising drive to build a “world-class” military by 2050 – even as military tensions in the South China Sea and the Taiwan Straits have become more fraught.

Xi in August, speaking ahead of Tuesday’s 96th anniversary of the People’s Liberation Army (PLA), told China’s armed forces to speed up modernisation.

Experts say India remains a ways away from matching China.

As Laxman Kumar Behera, who teaches at Jawaharlal Nehru University’s Special Centre for National Security Studies in New Delhi, told Bloomberg, “Allocation for new systems and platforms falls short especially because western and northern borders are still unstable and the Indo-Pacific is militarising.”

India should consider a road map for defence modernisation like it has for other sectors to lock in a certain amount annually in the budget, Behera added.

 With inputs from agencies