Defense State of India

Purpose of this article is to cover the technological state of Indian defense services and potential areas for improvement. Let’s start with the budget:

2023 Defense Spends Globally

India’s global military spending (not equivalent to budget) becomes $83 billion in 2023 placing it 4th in global military spending.

• USA → $900 Billion, China → $296 Billion, Russia → $109 Billion, INDIA ($83 Billion) , Saudi Arabia → $75 Billion … Japan → $50 Billion while Israel had $15 Billion.
• Economic challenges inevitably spill over into reducing defense budgets, as evidenced by Pakistan’s current situation. While seeking to bolster its capabilities with discounted Chinese defense systems, Pakistan faces a dilemma: the equipment often falls short, plagued by frequent malfunctions. Additionally, Pakistan’s counterterrorism and extremism frameworks appear outdated, struggling to adapt to the swiftly evolving landscape of asymmetric threats.

The significant increase in global military spending, reaching a record $2440 Billion, is indeed noteworthy. If this trend persists over the next few years, it could signal alarming prospects as it’s already been a decade. Consistent and rapid growth in military expenditures often correlates with heightened tensions and the potential for large-scale conflicts whether regional, civil, or a full-scale war.

The rise in global military spending in 2023 can be attributed primarily to the ongoing war in Ukraine and escalating geopolitical tensions in Asia and Oceania and the Middle East. Military expenditure went up in all five geographical regions, with major spending increases recorded in Europe, Asia and Oceania and the Middle East. The two largest spenders, the United States and China, accounted for around half of global military spending in 2023

• US military spending was $916 billion in 2023. The USA remained by far the largest spender in the world, allocating 3.1 times more to the military than the second largest spender, China (According to Chinese defense reports, some say it’s equivalent to US budget). The biggest percentage increase among all US military spending categories in 2023 was for ‘research, development, test and evaluation’ (RDT&E). The USA spent 9.4 per cent more in real terms on RDT&E than in 2022. The USA has prioritized RDT&E spending, in relative terms, over all other military spending categories since around 2014. This aligns with its decision to shift its focus away from counterinsurgency operations and asymmetric warfare to developing new weapon systems that could be used in a potential conflict with adversaries with advanced military capabilities.
• United States, currently has about 800 overseas military bases, with 173,000 troops deployed in 159 countries.

China, the world’s second largest military spender, allocated an estimated $296 billion to the military in 2023. China is the main driver of spending trends elsewhere in the region since many of its neighbors perceive China’s growing military power as a reason to enhance their own military capabilities. However, the rate of military spending growth has slowed over the past 10 years, this also reflects the slower rate of Chinese economic growth during the past decade. Beijing has not detailed how the increased 2024 budget will be spent, though there is a clear commitment to enhance People’s Liberation Army (PLA) capabilities for a potential Taiwan contingency by 2027 and full military modernization by 2035 — as dictated by President Xi Jinping, estimates of allocation are as follows (totally an educated guess):

• Military Personnel: While the exact figure is unknown, it’s likely lower than the US at around 25–30%. China relies more on conscripts, and their pay scales are lower.
• Operations & Maintenance: This could be similar to the US at 25–30%, covering training, base operations, equipment upkeep, and fuel.
• Procurement: This might be a larger portion (30–35%) compared to the US, as China is actively building new weapon systems and equipment.
• Research & Development: This could be around 15–20%. China is placing growing emphasis on developing indigenous military technologies.

The American Enterprise Institute (AEI), a Washington-based think-tank, in a report, estimated China’s true military spending to be $710.6 billion annually. According to Mackenzie Eaglen, senior fellow at the AEI, Beijing’s publicly released military budget is inaccurate and does not adequately capture the colossal scale of its ongoing military build-up and wide-ranging modernization of the armed forces. It is believed that the Chinese budgetary data does not include expenditures on China’s space forces, military satellites or growing counter-space capabilities. Moreover, China’s military R&D expenditures are commonly called a ‘black box’ since China publishes no information regarding its specific investments in this area.

Following corruption scandals in 2023 involving the PLA Rocket Force and the Equipment Development Department, reportedly related to its procurement practices, part of the budget may go to resolving problems related to equipment purchases in addition to continued efforts to improve personnel and training. Military purges are frequent in order to eliminate the corrupt elements and streamline/strengthen the course of PLA.

As regards the South China Sea, over 55 percent of India’s trade passes through the waterway. Therefore, India has amplified strategic cooperation including in oil, gas, and defense with the littoral states (states along the coastline).

At an estimated $109 billion, Russian military expenditure in 2023 was 24 per cent higher than in 2022 and 57 per cent higher than in 2014, when Russia annexed Crimea. In 2023 Russia’s military spending was equivalent to 5.9 per cent of GDP and 16 per cent of total government expenditure, which were the highest levels recorded by Russia since the dissolution of the Soviet Union.

• The increase in Russian military expenditure in 2023 was largely facilitated by Russia’s economic performance, which surpassed expectations despite a significant fall in the country’s oil and gas revenue. Russia has relied on its sovereign wealth fund and state loans to finance its expanding budget deficit, which has allowed it to limit the impact of its full-scale invasion of Ukraine on its economy. Figures for Russia’s military expenditure in 2023 are highly uncertain due to the increasing opaqueness of Russian financial authorities since the full-scale invasion of Ukraine in 2022. In addition to the state budget, funding to support the invasion has come from off-budget revenue streams such as businesses, individuals and organizations.
• The Russian government has announced its proposed budget for 2024. For the first time in modern history, the country is set to spend 6 percent of gross domestic product (GDP) on the military, and defense spending will exceed social spending. The war against Ukraine and the West is not only the Kremlin’s biggest priority; it is now also the main driver of Russia’s economic growth.

India among top global military spenders but expenditure declines as share of budget

With military expenditure of $83.6 billion in 2023, India was the fourth largest spender globally. Indian spending was up by 4.2 per cent from 2022 and by 44 per cent from 2014. The increase in India’s military spending was mainly a result of growing personnel and operations costs, which made up almost 80 per cent of the total military budget in 2023. This aligns with the government’s priority to strengthen the operational readiness of the armed forces amid ongoing tensions with China and Pakistan.

In comparison, capital outlays to fund military procurement remained relatively stable, at around 22 per cent of the budget in 2023. A total of 75 per cent of these outlays went towards equipment produced domestically, which was the highest level ever and up from 68 per cent in the previous year. The continued shift towards domestic procurement reflects India’s goal of becoming self-reliant in arms development and production. Majority of the defense budget goes out to pension & salaries. Defense modernization expenditure is very low: 80% of of our defense budget is consumed as revenue spending / operating expenses (procuring ammunition's, resources, movement of personnel, pay allowances etc.) while only 30% is spent on capital expenditures for modernizing forces. The fastest growing component of India’s Defense budget is defense pension bill, not expenses on procurement of military hardware. Hence we’ll cover these issues: falling expenditure on defense as percentage of GDP, high share of pension, continued reliance on imports to meet defense equipment needs, and shorter tenure of Agnipath recruits compared to regular cadres. Salaries and pension account for 52% of the defence budget in 2023–24. This does not include salary of Rashtriya Rifles, National Cadet Corps (NCC), Joint Staff and Agnipath as detailed break-up of these expense heads is not provided.

The Standing Committee on Defence (2018) had recommended that the Ministry of Defence should be allocated a fixed budget of about 3% of GDP to ensure adequate preparedness of the armed forces. However, over the last decade, India’s spending on defence has consistently been lower than this recommended level. In 2023–24, allocation to the Ministry is estimated to be marginally lower than 2% of GDP. The allocation made to the Ministry is also less than what is sought by the defence forces. The amount allocated to the Ministry each year is determined based on various needs of the forces such as acquisition of weaponry and payment of salaries and pensions.

In 2022–23, the amount allocated to the armed forces was 28% lower than what was sought by the forces as part of their projected needs. The shortfall in allocation has been higher for the capital component of the budget as compared to the revenue component.

It was highlighted by the Ministry that consistent shortfalls in the defence budget over a long period has led to serious capability gaps, including compromising the operational preparedness of the three services. Lack of adequate funds has forced the Ministry to manage its expenditure through ad-hoc mechanisms such as postponing procurements and delaying payments.

Army accounts for 57% of the budget while Navy and Air Force make up 17% and 19% of the allocation respectively. Excluding pensions as Army has the highest obligations of the same, the gap becomes closer amongst the tri-services. The annual growth rate of expenditure for modernization of the Air Force was the lowest among the three forces.

• The Standing Committee on Defense (2018) had noted that modern armed forces should have 1/3 of its equipment in the vintage category, 1/3 in the current category, and 1/3 in the state-of-the-art category. However, Indian Army had 68% of its equipment in the vintage category, 24% in the current category, and 8% in the state-of-the-art category. The Committee also noted that over the years, the Army has accumulated a substantial deficiency of weapons, stores, and ammunition. It found that adequate attention has been lacking with respect to both policy and budget for modernizing the aging Armory.
• Almost half of the Navy’s budget (including the expenditure on pension and coast guard) has been allocated for modernization of the Navy. Within modernization, most of it has been allocated for the naval fleet and remaining has been budgeted to be spent on naval dockyard / projects. The expenditure on naval dockyard/projects was estimated to increase by 49% in 2023–24.
• In the past, the CAG has raised issues in relation to the capital acquisition process of the IAF. 13 In its report (2019), the CAG examined 11 contracts of capital acquisition signed between 2012–13 and 2017–18, with a total value of approximately Rs 95,000 crore. It found that the current acquisition system was unlikely to support the operational preparedness of the IAF and recommended that the Ministry of Defence undertake structural reforms of the entire acquisition process. 13 The Estimates Committee (2018) noted that there should be 70% serviceability of aircrafts since aircrafts have to undergo standard maintenance checks. 14 However, as of November 2015, the serviceability of aircrafts was 60%. Serviceability measures the number of aircrafts that are mission capable at a point in time.

India continues to rely significantly on imports for defense equipment

According to data maintained by SIPRI, India was the largest importer of arms between 2011–2021 followed by Saudi Arabia, China, and Australia. It accounted for 12% of the total volume of arms imported in the period from 2011 to 2021.

Standing Committee on Defence (2022) expressed concerns over India’s increasing import of arms and equipment.6 Between 2017–18 and 2021–22 (up to December 2021), 87 out of the 239 contracts for acquisition of military hardware worth Rs 1.18 lakh crore have been signed with foreign vendors including USA, Russia, Israel, and France. The defence equipment imported during this period includes helicopters, aircrafts, missiles, rifles, simulators, and ammunition.

LoL

• The Standing Committee on Defense (2022) noted that although procurement from foreign vendors is less than from their Indian counterparts, still the value of imports has been constantly increasing since 2016–17.6 It recommended that Defense Public Sector Undertakings (DPSUs), Defense Research and Development Organization (DRDO) and private industries work in tandem to produce not only import substitute equipment but also expand the export potential so that India becomes an exporter of Defense equipment. The Estimates Committee (2018) noted that dependence on foreign suppliers, especially for military hardware, makes India’s security vulnerable as during emergency situations the supplier may not provide the required weapons or spare parts.
• Over the last few years, there has been a significant increase in defense exports which has been primarily led by the private sector. Between 2016–17 and 2021–22, India’s defense exports increased at an average annual rate of 53%. The share of the private sector in defense exports increased sharply at an average annual rate of 114%. The Ministry of Defense has set a target of achieving defense exports worth Rs 35,000 crore by 2024.

• Saudi Arabia was the fifth biggest military spender globally in 2023. Its spending rose by 4.3 per cent to an estimated $75.8 billion, or 7.1 per cent of GDP. Saudi Arabia is the world’s largest exporter of crude oil, and the growth in its military spending in 2023 was partly financed on the back of increased demand for non-Russian oil and rising oil prices following Russia’s full-scale invasion of Ukraine.
• The budget for 2023 also marked the first year of Japan’s biggest military build-up programme since the end of World War II. Under the programme, Japan aims to bolster its counterstrike capabilities by investing heavily in aircraft, ships and long range missiles. It plans to spend $310 billion on the military in 2023–27, which would give it an average annual military budget of $62 billion over the period.

India’s Arsenal

Opportunities Upfront

1. The ARMs Race

Not only this, take a look at the ARMs (At Risk Metals) race lurking behind the Defense capabilities. Everything from modern firearms and missile guidance systems to F-35s and nuclear submarines is reliant on these materials.

• As the UK government puts it with usual understatement, “Sustained disruption [to ARMs supply] would… reduce the UK’s freedom of action.”

Or as the U.S. government puts it with usual bluntness, “Without these materials, history shows that industrialized nations have been . . . [defeated] on the battlefield. In short, no country on earth will remain developed or sovereign without access to ARMs.

Two of the three most-used materials for semiconductors are ARMs (highlighted in orange above). Cut off access to those metals and there are no more smartphones, computers, TVs, or any other system that depends on a chip to operate. Even AI — with its insatiable hunger for more chips — would become untrainable and unusable.

Lithium, nickel, cobalt, manganese, and graphite are on the U.S. Department of Energy’s ARMs list, and they are all crucial for batteries. Others on the list are key inputs for EVs, wind turbines, and solar panels.

In the UK, seven of the points in their government’s Ten Point Plan for a green industrial revolution require a stable supply of ARMs into the country.

Without these key minerals to power grids and infrastructure, the citizens of countries without ARMs won’t be able to easily communicate, travel, or work.

Countries at advantage…

Russia is the top producer of palladium in the world. It’s also the second-largest producer of nickel, the third-largest of cobalt, and the fifth-largest of graphite — all of which are necessary for battery production.

When the Russia/Ukraine conflict began in 2022, it suddenly became clear how much leverage its ARMs had over the rest of the world. The price of metals Russia dominates immediately skyrocketed. Some of them doubled in price.

For several decades, China has also been using state intervention and subsidies to establish control of several ARMs markets — including cobalt, lithium, and rare earth elements.

To give a sense of just how dominant Chinese production has become, consider this: The United Kingdom has a list of eighteen ARMs. China is the largest producer of twelve of those.

China has also established a vice-grip on the U.S., being its largest source of imports for several ARMs like the semiconductor metals in the first table of this article.

China has already begun flexing its muscle…

In just the last year, it has enacted major export restrictions for germanium and gallium — both on the list above — as well as graphite and rare earth extraction technologies.

The message is clear: The ARMs race is on, and it’s winner takes all.

2. Exports

The top 10 arms exporting countries in 2024 are:

1. United States (42%): Major Conventional Weapons (as per SIPRI):

• Aircraft: The US is a major exporter of fighter jets (F-16, F-35), attack aircraft (A-10), transport aircraft (C-130), and helicopters (UH-60 Blackhawk).
• Missiles: This includes air-to-air missiles (AIM-120 AMRAAM), air-to-ground missiles (AGM-114 Hellfire), and surface-to-air missiles (Patriot).
• Armored Vehicles: Tanks (M1 Abrams), armored personnel carriers (Bradley Fighting Vehicle), and mine-resistant ambush protected vehicles (MRAPs) are among US exports.
• Artillery: Self-propelled howitzers (M109 Paladin) and towed artillery guns (M777) are part of the US export portfolio.
• Naval Vessels: The US doesn’t typically export large warships but may sell patrol boats or specialized vessels.

Other Military Equipment:

• Electronics: Radar systems, communication equipment, and electronic warfare systems.
• Ammunition: Bullets, bombs, missiles, and other explosives for various weapon systems.
• Logistics and Support: Spare parts, training programs, and maintenance services for exported equipment.

USA majorly supplies to it’s allies that include Taiwan, Japan, South Korea strategically to support them against threat of China, North Korea. In middle east, Saudi Arabia & Israel. Also recently witnessed as part of Ukraine-Russia → UK & European NATO members are benificiaries.

2. France (11%): Defense Exports (with Examples):

Combat Aircraft: France is a leader in this category, particularly known for:

• Rafale Fighter Jet: A multirole fighter jet exported to countries like India, Egypt, Qatar, and Greece.
• Dassault-Breguet Mirage: Older fighter jets potentially exported to former French colonies or countries with close military ties.

Land Systems: France offers various armored vehicles and weaponry:

• Leclerc Main Battle Tank: A heavily armored tank exported to the United Arab Emirates and potentially other partners.
• VBMR Griffon: An armored personnel carrier exported to several countries, including Belgium.

Naval Vessels: France has a strong shipbuilding industry, exporting a range of vessels:

• FREMM Multimission Frigates: Frigates exported to Egypt, Morocco, and potentially others.
• Scorpène-class Submarines: Diesel-electric attack submarines exported to countries like India, Brazil, and Chile.

Electronics & Missiles: French defense companies produce advanced systems:

• MBDA Missiles: Manufacturer of air-to-air missiles (e.g., Meteor) and air-to-surface missiles (e.g., Exocet) used by various countries.
• Thales Radars and Electronic Warfare Systems: Advanced electronics exported to support air defense and military operations.

Major Recipients (Strategic Considerations):

• Middle East: Historically, a major market for French arms, with countries like Saudi Arabia, Egypt, and the United Arab Emirates being recipients.
• Asia: India is a growing market for French defense equipment, and France also supplies some Southeast Asian nations.
• Europe: France fulfills some defense equipment needs of European partners, particularly within joint development programs.

3. Russia (11%)

4. China (5.8%): Exports for Economic Benefits, Geopolitical influence & also sourcing valuable data for China to improve its own military technology.

Types of Equipment Exported:

• Land Systems: This likely includes armored vehicles (tanks, armored personnel carriers: Main Battle Tanks (MBTs) → VT4 (export variant of MBT-3000), Armored Personnel Carriers (APCs) → VN1), artillery (Self-Propelled Howitzers (SPHs) → PCL-181 (155mm), Multiple Rocket Launchers (MRLs) → AR-3 (300mm caliber), QBZ-95 (assault rifle), QSG-18 (pistol)), and potentially infantry weapons (rifles, mortars) depending on recipient country regulations.
• Air Defense Systems: China might export anti-aircraft missiles, radar systems, and potentially fighter jets. Anti-aircraft Missiles: HQ-9 (long-range), FK-1000 (medium-range), Radar Systems: JY-27 (3D air defense radar), Fighter Jets (limited exports based on agreements): JF-17 Thunder (joint development with Pakistan)
• Naval Vessels: Exports could include smaller vessels like patrol boats, corvettes, or submarines (depending on recipient country capabilities and restrictions). Patrol Boats: Type 022 (missile boat), Corvettes: Type 056 (series), Submarines (limited exports based on recipient capabilities): S26T (diesel-electric attack submarine) — potential export
• Missiles: This is a sensitive area, but China might export anti-ship missiles, cruise missiles, or even short-range ballistic missiles depending on the recipient. Anti-Ship Missiles (ASMs): YJ-8 series, Cruise Missiles: CJ-10 series

Focus on Specific Regions:

• South and Southeast Asia: Countries like Pakistan, Bangladesh, Myanmar, and Thailand are major importers of Chinese weaponry.
• Africa: China has been increasing its defense exports to African nations in recent years.
• Middle East: Some countries in the Middle East also import Chinese military equipment.

5. Germany (5.6%)

6. Italy (4.3%)

7. United Kingdom (3.7%)

8. Spain (2.7%)

9. Israel (2.4%)

10. South Korea (2%)