Budget 2025-26 must prioritise defence and security over welfare schemes

India's growing external and internal threats demand urgent shifts in fiscal focus to strengthen defence, policing, and cyber capabilities

Budget-as-usual is not an option for Narendra Modi and his finance minister this time. While normal obsessions about growth, jobs, infrastructure and fiscal balance will always remain important, Budget 2025-26 has to focus on something that has been screaming for attention for long: External and internal security.

 

Defence spending takes up one-eighth of the Budget, and possibly accounts for about 2-2.4 per cent of gross domestic product (GDP), the upper end figure being an estimate made by the Stockholm International Peace Research Institute for 2023. The small, single-digit increase budgeted for this fiscal (2024-25) is barely enough to cover for inflation. In short, even with an allocation of Rs 6.21 trillion for defence, we are falling seriously short, given the growing security challenges in our neighbourhood.

 

Over the past few years, external security threats have escalated, even as our capabilities have stagnated or, in some cases, declined. Despite a tentative handshake across the Himalayas with China over patrolling rights in Ladakh, China remains a potent threat. It is rapidly investing in advanced fighter aircraft even as our effective air defence squadron strength is falling. Chinese warships will soon be roaming around in the Indian Ocean to our detriment.

 

Meanwhile, Pakistan has chosen to be a Chinese vassal state, but there is now a massive threat emerging on our eastern flanks, where a regime change operation in Bangladesh (possibly supported by the US) has made our entire Northeast vulnerable to infiltration and jihadi terrorism. What was once a “two-and-a-half front” war scenario (Pakistan, China, and internal security threats) that the armed forces were preparing for now threatens to evolve into a “three-and-a-half front” conflict that we must be prepared for.

 

All this is happening when global geopolitics has become more unpredictable and India’s list of dependable friends is narrowing. The US under Joe Biden has been speaking with a forked tongue, with one section seeking better defence ties with India, while another segment has sought to undermine it. Consider these facts: Supplies of US engines for our Tejas fighter aircraft have been delayed for inexplicable reasons. The US has targeted sections within Indian intelligence for allegedly trying to bump off a Khalistani terrorist on American soil, and our National Security Adviser cannot land in the US without facing possible arrest in a civil case launched by the same terrorist. The US-led Five Eyes intelligence sharing arrangement is busy feeding information to the Canadian government on the possible involvement of Indian agencies in the killing of another terrorist, Hardeep Singh Nijjar, information that implies deeply damaging penetration of Indian diplomatic correspondence.

 

An Indian businessman has been targeted by the US Securities and Exchange Commission for a “crime” where the victims, if any, have nothing to do with American interests. Thanks to the two ongoing wars in Ukraine and West Asia, the military industrial complexes in the US and Asia (Russia’s primarily) are overloaded with orders, and cannot deliver promised supplies. Russian deliveries of the S-400 air defence systems have been badly delayed.

 

Internally, we have seen how weak our cyber capabilities are against two recent threats. Our airlines and schools in Delhi were economically impacted by hoax bomb threats that remain largely untraced. If non-state (and state) actors beyond the reach of Indian security agencies can damage us economically without incurring any major cost to themselves, we are sitting ducks. The porous borders with Bangladesh and Myanmar, where the latter’s government has lost control to various ethnic armies, poses another internal security threat, as drugs, arms and infiltrators penetrate weak fences. The whole of the Northeast is exposed to covert foreign intervention and internal subversion. Financial frauds can also undermine internal economic confidence as India has rapidly digitised its economy without a commensurate investment in cyber defences.

 

This is the backdrop against which the Budget for 2025-26 must reset its priorities. If there is any time when non-economic priorities must take centre stage, this year’s and next year’s Budgets must stand out. Three areas — defence, internal policing, and cyber and hybrid defence (and warfare) capabilities — need massive resources, and this implies that the share of defence and internal security in GDP must rise for the next five to 10 years to address our current shortfalls. In the upcoming Budget, the finance minister must provide for a massive additional allocation of Rs 1-1.5 trillion for defence and internal security, possibly by slimming down welfarist spending and accelerating privatisation processes. An annual increase of 0.2-0.25 per cent in defence spending as a share of GDP is vital to transition from security vulnerability to competence between now and the early 2030s.

 

Given the unreliability of defence supplies from both America and Russia, and also the possibility that unfriendly nations like China may be supplying components for these equipment (many Russian equipment now have Chinese or Ukrainian parts), the only real option is to rapidly improve our defence research and development (R&D) and develop internal suppliers for crucial defence projects. Developing our own fighter engines ought to be a top priority, just as expanding our naval fleet through enhanced domestic production is crucial for our defence of the Indian Ocean.

 

Our internal policing also needs a huge fillip in terms of budget allocations for crime detection, cyber threats, and terror prevention.

 

In an unsafe world, where alleged democratic “friends” impose their own agendas as the price for supporting us with vital equipment and components, and our enemies are dramatically improving their defence capabilities, strengthening ourselves is the only option. Threats from non-state actors, including tech companies that dance to the beats of foreign powers, also need to be managed better.

 

The first and most basic responsibility of any government is to protect its people from external threats and internal harm. Budget 2025-26 has to focus on meeting this responsibility. The political climate is just about right for enabling this spending shift to defence. In 2025, there are only two major elections (Delhi and Bihar). The Bharatiya Janata Party (BJP) can afford to write off Delhi, and Bihar is months away. In 2026, five Assembly elections are due (Assam, Tamil Nadu, Puducherry, Kerala and West Bengal), but the BJP has a big stake only in Assam, so once more, the political pressure for freebies can be resisted and defence can get its due.

 

The spike in defence and security spending needs to occur more quickly in the next two budgets. After that, the window for fiscal manoeuvre will start narrowing as more critical elections fall due. 

The writer is a senior journalist