India has high hopes from Finance Minister Nirmala Sitharaman’s forthcoming Union Budget 2025, scheduled for February 1, as it provides a significant development for defence manufacturing that underpins national security. The defence sector of India is crucial to national security and vital for indigenous production, and hence, considerable hope is being pinned on Union Finance Minister Nirmala Sitharaman’s Union Budget of 2025 coming out on February 1. In addition, India’s military aims of modernization, autonomy, and innovation have to be met with proper urgency.
India’s Defence Budget Growth Over the Years
Reportedly, approval aggregations stood at ₹2.53 trillion in 2014 and it is being said that re-examinations increased further to ₹6.22 trillion for FY2024-25, which indicates about a 2.5 times increment from the year 2014 to FY 2014-15. Pensions were excluded from the total, so an 8.6% rise was earmarked for the defence budget in FY2024-25 as opposed to FY2023-24, and for an aggregate defence budget, including pensions, a rise of 7.1%.
PwC claimed in its report that defence engagements in India account for about 12.9% of the overall budget allocation across all ministries. A capital expenditure is up this year, raised by 15% against a 5.1% increase in revenue expenditure.
India’s Defence Budget Trends (2014-2025)
| Year | Defence Budget (₹ Lakh Crore) | % Increase from Previous Year |
| 2014-15 | 2.53 | – |
| 2015-16 | 2.58 | 1.97% |
| 2016-17 | 2.74 | 6.2% |
| 2017-18 | 2.95 | 7.7% |
| 2018-19 | 3.18 | 7.8% |
| 2019-20 | 3.44 | 8.2% |
| 2020-21 | 4.71 | 36.9% |
| 2021-22 | 4.78 | 1.5% |
| 2022-23 | 5.25 | 9.8% |
| 2023-24 | 5.94 | 13.1% |
| 2024-25 | 6.22 | 4.7% |
India’s Defence Budget Expectations for 2025
Here are the Major Defence Budget Expectations for 2025
More Capital Investments
The capital budget has recorded growth at 11% in the past five years, which is also likely to touch ₹1.90 lakh crore in FY 2025-26. Around 75% of the said amount (about ₹1.43 lakh crore) is mostly devoted to domestic procurements, leading to indigenous manufacturing.
Major Defence Procurements
These include contracts for six submarines under Project P75(I) and 26 maritime aircraft. Approvals are likely in short-range air defence systems, light machine guns, and armoured multipurpose vehicles that would stand to gain for the domestic industry.
R&D Investment
The allocation for R&D has, at present, reached 3.8% of the defence budget and is likely to undergo a dramatic change in FY 2025-26. Important projects include AMCA and Project P75(I), which are likely to benefit from an even more significant boost. The Aditi scheme is anticipated to maintain its support as part of the various phases of the iDEX initiative.
Growth in Defence Exports
In 2024, India’s arms exports achieved a record level of $2.6 billion, reflecting an impressive growth rate exceeding 32.5% compared to previous years.
Hence, by 2028, the government is enforcing measures of attaining an annual turnover to the order of $35 billion and exports in defence to the size of $6 billion; consequently, there rises an imperative for larger budgetary financing and policy intervention for international collaboration.
Industry Insights and Sectoral Forecasts
Aerospace and Defense
Industry leaders expect something will bring the spurt of capital expenditure for the development of infrastructure and manufacturing. Last year, ₹1,000 crore of venture capital funds were earmarked for space-tech startups, with similar or better expectations.
Drone Infrastructure
Increasing investment in drone technology by state governments signifies the need for a well-designed and robust infrastructure for large-scale operations. It will be critical to have a sound indigenous base for the development of drone technology for military and civilian applications.
Shipbuilding and Maritime Security
India has only 0.05% of the total global shipbuilding capacity in contrast to China, which stands at 47%; South Korea, 30%; and Japan, 17%.
This may help support domestic shipbuilding infrastructure and, through new initiatives such as the Heroes Fund and potential subsidies under SBS Policy 2.0, spur the indigenisation of shipbuilding.
Strengthening National Security Through Smart Investments
Ensuring the armed forces of India are well-equipped is at the top of the priority list. This involves purchasing new aircraft, ships, and military vehicles while being prepared and combat-ready through training and exercises.
To promote domestic production, industry leaders expect tax incentives: extensions of the 15% concessional corporate tax rate and introducing tax holidays for defense production. These will pave the way for private sector participation and give impetus to the defense ecosystem.
The year 2025 has begun to be referred to as the ‘Year of Reforms’ by the Ministry of Defense. Of course, it promises to be a good year for major expected changes in policy that deal with budgetary issues. A very heavy focus on modernization, self-reliance, and the quest for tech-wise solutions would bring a new luster to India’s national security and also help place India among some of the most powerful forces of the world in the global defense industry.
