India presents its budget for FY 2025-26 on February 1 this year. And with it comes the age-old question, what will be the share of the budget for defence this time? The answer might lie with the Finance Minister Nirmala Sitharaman, but the background was set about 15 years ago.
In 2010, Iranian nuclear technicians and others turned on their computers like any other day; unaware that the world was about to witness the quiet launch of what would become one of the most sophisticated cyber attacks in history, aimed squarely at Iran’s nuclear program. Deep within Iran’s Natanz facility, centrifuges spun in secrecy, enriching uranium for what the world feared might be the creation of nuclear weapons.
Stuxnet, a cyberweapon had made its way into Iran’s industrial control systems. The worm’s creators, working in the shadows, designed it to target Siemens software used to control the centrifuges. But instead of immediately causing damage, Stuxnet worked quietly, speeding up and slowing down the centrifuges in a way that caused them to tear themselves apart. All of this happened without raising alarms. No visible traces. No physical damage. Just a slow, unseen destruction of Iran’s nuclear ambitions. The attack was not just a virus; it was a weapon of war, launched without a single shot being fired.
In the quiet corners of a battlefield, far from the thunderous clatter of jets and artillery, the war of tomorrow is already being fought. It isn’t waged with bullets or tanks, but with bits and bytes, with algorithms and artificial intelligence. This is the world of cyber warfare, a growing domain that has redefined the very nature of conflict. As China and other nations continue to make significant strides in their military technologies, particularly in the areas of cyber capabilities and artificial intelligence, the question for India becomes: How can a country, whose defence budget represents only 2% of its GDP, balance the urgent needs of soldier welfare, traditional force capabilities, and the emerging threat of asymmetrical warfare like cyber threats? The upcoming Union Budget for 2025 may hold the answer.
“The supreme art of war is to subdue the enemy without fighting.”
- Sun Tsu from “The Art of War”
The Landscape of India’s Defence Budget
For decades, India’s military budget has been a subject of strategic scrutiny, both domestically and globally. Despite being the world’s fourth-largest military power, India’s defence budget has traditionally been smaller than those of its more adversarial neighbours. With the military tensions on its northern borders with China and ongoing security concerns from Pakistan, India’s military readiness remains a top priority for national security. The task of equipping the military for modern-day warfare though involves more than just purchasing new fighter jets and tanks—it also requires an urgent focus on emerging domains like cyber warfare and space capabilities.
In FY 2024-25, India’s defence budget stood at Rs 6.22 lakh crore (approximately $74 billion), comprising nearly 13% of the national budget. However, this allocation remains modest, especially when compared to global military spenders like the United States and China. India’s military expenditure accounts for only about 2% of its GDP, significantly below the 2.5% threshold that experts recommend for countries facing increasing external threats.
Within this constrained budget, the Indian government faces the daunting challenge of balancing soldier welfare, modernising military equipment, advancing indigenous capabilities, and preparing for new forms of warfare. While past budgets have managed to address some of these concerns, the need for a more strategic, multi-domain approach to defence budgeting has never been more pressing.
Soldier Welfare: The Backbone of Defence
No defence strategy can succeed without well-trained, well-equipped, and motivated soldiers. But in India, the welfare of its armed forces often takes a back seat to more immediate procurement and infrastructure needs. The personal well-being of soldiers—their pay, pensions, healthcare, and housing—remains an essential part of India’s military strategy and a significant portion of its budget.
As of 2024-25, pensions make up nearly 23% of the total defence budget. While this is a reflection of India’s commitment to its veterans, it also places a significant strain on the overall budget. This spending imbalance, though necessary, leaves little room for more futuristic spending on technology and advanced systems. In light of this, many analysts argue for a more holistic, long-term approach to soldier welfare that takes into account both immediate needs and future challenges. The question then becomes: How can India optimise its soldier welfare policies while simultaneously advancing its technological prowess?
To this end, a gradual shift towards increasing capital expenditure in defence, as opposed to revenue expenditure (which largely funds pensions and personnel costs), is vital. This allows for investments in the future while ensuring that soldiers continue to receive the necessary support in the present. A more strategic balance could reduce dependency on pensions in the future and free up funds for modernisation.
Preparing for the Future of Warfare
At the heart of India’s defence priorities lies the imperative to modernise its armed forces. As security threats evolve, so too must the capabilities of the armed forces. In this context, the Union Budget for 2025 has a unique opportunity to allocate a significant portion of the defence budget to modernising India’s military arsenal—particularly its air force and navy.
The Indian Air Force (IAF) is currently short of at least 11 fighter squadrons, and its fleet is ageing. The country’s naval forces also face a dire need for new warships and submarines. In line with its “Make in India” initiative, India has been pushing for increased domestic production of defence hardware. The defence budget for FY 2024-25 allocated 27.67% of its total defence budget to capital expenditure, but this remains insufficient in the context of India’s strategic needs. A more substantial increase in this allocation is needed to meet future demands.
Simultaneously, India must make rapid advancements in space technologies and unmanned systems. Given the growing importance of satellite communications, missile defence systems, and space-based intelligence, increasing investments in space infrastructure, cyber warfare, and technology will be key to maintaining military supremacy. The defence sector’s dependence on private industry and public-private partnerships (PPPs) will also be crucial in fast-tracking modernisation efforts.
Modernisation is not solely about hardware. It’s also about adopting the best practices in software and systems integration, such as the digitisation of battlefield operations and the development of AI-powered logistics and maintenance solutions. These advances are integral to enhancing operational readiness and ensuring that the armed forces are equipped for future warfare.
The Emergence of Cyber Warfare: A New Frontier
In 2011, as the ripple effects of Stuxnet were still being felt, a new cyber threat emerged—DuQu. Though born from the same code as Stuxnet, DuQu wasn’t designed to wreak havoc. Instead, it had another purpose: espionage. This new cyber tool quietly slipped into the systems of over 400 million computers, gathering intelligence without detection. One of its most significant targets was a series of sensitive meetings, held in hotels where Iranian nuclear talks were taking place. DuQu infiltrated the very systems hosting these high-stakes negotiations, silently collecting keystrokes and confidential data, all the while remaining hidden.
The attacks, Stuxnet and DuQu, were connected by a common thread: they represented the growing power of cyber warfare in geopolitics. These were not isolated incidents but part of a larger trend, where the digital world became as important, if not more, than the physical one. And the trend is going nowhere.
As the world becomes increasingly digital, the military landscape is evolving in tandem. Cyber warfare, once an abstract concept, is now a clear and present threat. India is faced with the dual challenge of building its own cyber defence capabilities while defending against the increasing cyber incursions from hostile nations, especially China.
The growing reliance on information networks and technology has created a vulnerability, one that can be exploited by state and non-state actors alike. The 2025 defence budget must provide substantial funding for enhancing India’s cyber defence mechanisms. This includes investing in cyber intelligence, securing military networks, and training specialised personnel who can wage successful cyber operations.
While some progress has been made in strengthening India’s cybersecurity infrastructure, the urgency of modernising the cyber warfare domain cannot be overstated. India’s National Cyber Security Policy and the creation of the Defence Cyber Agency have laid a foundation, but these initiatives require further financial and technical support. With the increased threat of cyber-attacks on military systems, it is imperative that cyber warfare becomes a central focus of India’s defence budgeting.
Moreover, advancements in artificial intelligence (AI) and machine learning (ML) are revolutionising cyber warfare. These technologies enable faster detection of cyber threats and allow for the automation of responses, significantly enhancing India’s offensive and defensive cyber capabilities. The need for substantial R&D investments in AI and ML within the military domain will be a key consideration for the upcoming defence budget.
Defence Budget Challenge of Balancing Priorities
One of the main challenges facing India’s defence budget is the need to balance immediate, conventional warfare requirements with a long-term investment in new-age technologies. Defence procurement is often delayed due to bureaucratic hurdles, leaving the armed forces dependent on outdated equipment and systems. At the same time, the demand for technological advancements, such as drones, unmanned vehicles, and AI-based weaponry, grows exponentially.
The key lies in strategic prioritisation. The 2025 budget must take a phased approach to military modernisation, focusing first on upgrading existing capabilities, while also investing in research and development for future technologies. This means a careful balance between immediate procurement for the armed forces and long-term investments in technologies like AI, drones, and quantum computing.
The current shift towards a more indigenous model of defence production, as outlined in India’s “Atmanirbhar Bharat” initiative, requires a focused budgetary push. The government must ensure that private industry is sufficiently incentivised to step up, through measures such as tax breaks, increased funding for innovation, and faster procurement processes for domestic companies. While India has made strides in indigenising defence production, it is clear that private sector participation must be ramped up to meet both the quantity and quality requirements of the armed forces.
The Role of Defence Exports
Another area that requires strategic attention is defence exports. India has made significant progress in this area, with defence exports reaching a record Rs 21,083 crore ($2.6 billion) in FY 2024, a 32.5% increase from the previous year. However, the target for 2028 is set at Rs 50,000 crore ($6 billion), and achieving this will require increased funding for international collaborations, production scale-ups, and marketing efforts.
Defence exports serve as both a financial boon and a strategic lever for strengthening India’s influence on the global stage. The 2025 budget must focus on making Indian defence products more competitive in international markets. This will involve not only enhancing product quality but also improving the speed and efficiency of production, as well as ensuring that India’s defence diplomacy is aligned with its export ambitions.
Strategic Budgeting for a Complex Future
In the quiet hum of a computer’s processor, nations were now fighting their battles. Their weapons? Not tanks or jets, but the ability to infiltrate, manipulate, and control the very systems that kept their adversaries running. Cyber attacks are more than just a threat to data, but a direct challenge to national security, power, and influence.
India’s defence budget, while substantial in absolute terms, remains a fraction of what many analysts believe is necessary for a nation with its security needs and ambitions. The upcoming Union Budget 2025 must reflect the complexity of modern warfare, combining traditional readiness with technological innovation. Balancing soldier welfare, modernisation, cyber warfare, and defence exports will be crucial if India is to maintain its position as a regional and global military power.
The government must take a forward-looking approach, one that integrates the latest technological advancements while ensuring that its armed forces are well-supported and equipped to meet immediate threats. In the face of rising global tensions and increasingly complex security challenges, India’s defence budget must be more than a reflection of current needs; it must be an investment in the future.
