"Thirty years ago, there were 500,000 people behind bars in America. Today, there are 2.2 million. The United States is home to 5 per cent of the world's population, but 25 per cent of the world's prisoners. Every year, we spend USD 80 billion to keep people locked up," Obama said in his weekly web and radio address to the nation.
Comparatively, India's annual defence budget is USD 40 billion. In India, 3.3 lakh people are in jail.
Prison rates in the US are the world's highest, at 724 people per 100,000.
In Russia the rate is 581 and that of India is just 30.
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In his address, Obama said over the last few decades, the US has locked up more non-violent offenders than ever before, for longer than ever before.
"That's the real reason our prison population is so high," he said.
"In too many cases, our criminal justice system is a pipeline from underfunded schools to overcrowded jails," he said.
Over the next few weeks, Obama said he will travel the country to highlight some of the Americans who are doing their part to fix the criminal justice system.
"I'll visit a community battling prescription drug and heroin abuse. I'll speak with leaders from law enforcement who are determined to lower the crime rate and the incarceration rate and with police chiefs who have dedicated their careers to keeping our streets and officers safe. I'll meet with former prisoners who are earning their second chance," he said.
"Earlier this month, Democrats and Republicans came together in the Senate to introduce such a bill -- one that would reduce mandatory minimums for non-violent drug offenders and reward prisoners with shorter sentences if they complete programmes that make them less likely to commit a repeat offense," he added.
The US President stated that a similar bill is working its way through the House of Representatives.
"I'm encouraged by these kinds of bipartisan efforts. This is progress -- not liberal ideas or conservative ideas, but common sense solutions to the challenges we face," Obama said.