Introduction
In 2025, global military spending surged to a record $2.46 trillion amid escalating security threats, geopolitical tensions, and rapid technological advancements. Nations around the world are increasingly investing in AI-driven defence systems, cyber warfare capabilities, and enhanced border security to navigate an unpredictable global landscape. Within this high-stakes arena, India and China have adopted significantly different defence expenditure strategies. While China already one of the world’s top spenders boosted its official defence budget by 7.2% to over $245 billion, experts contend that actual spending may be 40-50% higher due to undisclosed allocations fuelling complete modernisation of the People’s Liberation Army across land, sea, air, nuclear, space, and cyber domains. In contrast, India’s defence budget remains constrained at $78 billion, with just 25% kept for military modernisation, and defence spending accounts for just 1.9% of its GDP well below the 2.5% benchmark recommended for a credible deterrent against regional threats. This article explores the implications of these divergent investment approaches and their impact on regional security dynamics.
China’s Military Expansion: A 7.2% Increase in Spending
China’s defence budget for 2025 is set to reach 1.784665 trillion yuan (approximately USD 249 billion), marking a 7.2% increase. This rate, consistent for the past two years, reflects Beijing’s deliberate and steady approach to military modernization. While this single-digit growth appears modest compared to past decades of rapid expansion, it underscores China’s long-term strategy to strengthen its military amid an increasingly complex and “severe external environment.”
China’s new budget directs funds to advanced military capabilities. Investments in missile systems are crucial for deterrence and asserting territorial claims, particularly in contested areas like the South China Sea. The development of aircraft carriers and stealth aircraft aims to project power beyond China’s immediate borders, directly challenging U.S. naval supremacy and strengthening Beijing’s position in key strategic theaters such as the Taiwan Strait. Additionally, cyber warfare and electronic warfare have become priorities, with significant investments in AI-driven cyber operations and electronic warfare tools designed to defend against and launch digital attacks.
China’s economic strategy complements its defence expansion. By setting a GDP growth target of around 5% for 2025, Beijing ensures that military modernization aligns with broader economic stability. This balance is crucial given external pressures such as U.S. tariffs and trade tensions, which have posed challenges to China’s economy in recent years. The steady increase in defence spending is also a response to global military developments, particularly in the Indo-Pacific region, where the United States and its allies are strengthening their own capabilities. China’s focus on technological self-reliance further aligns with its national strategy of reducing dependence on foreign defence technologies.
China’s consistent 7.2% annual defence budget increase presents a challenge for India, especially along the 3,488 km-long Line of Actual Control (LAC). Since the 2020 Galwan Valley clashes, China has significantly improved its military assets, increasing border infrastructure and operational readiness. The disparity in defence spending between the two nations is evident, with China allocating approximately 1.78 trillion yuan (USD 249 billion) to defence, while India’s record budget allocation of Rs 6.81 lakh crore (USD 78 billion) remains significantly lower. This funding gap allows China to make substantial investments in advanced missile systems, AI-driven warfare, naval expansion, and space-based defence systems, while India must prioritize critical modernization projects within budgetary constraints.
In response, India must pursue a dual strategy of diplomacy and military modernization. Diplomatic engagement with Beijing remains essential to prevent border tensions from escalating, while strategic partnerships with nations such as the United States, Japan, and Australia through multilateral forums like the Quad offer avenues for technology sharing and joint military exercises. Infrastructure development, particularly through the Border Roads Organisation (BRO), is crucial for ensuring rapid troop deployment along the LAC.
China’s continued military expansion raises the possibility of an intensified arms race in the region. The persistent increase in defence spending, coupled with advancements in military technology, may lead to further militarization along the LAC. India faces the challenge of balancing economic constraints with the urgent need for military preparedness to deter potential aggression. A measured approach that integrates diplomatic initiatives, regional alliances, and targeted modernization efforts will be essential for maintaining stability in the Indo-Pacific. The disparity in defence budgets, with China spending USD 249 billion compared to India’s USD 78 billion, highlights the need for strategic recalibration to address emerging security concerns effectively.
India’s Counter Strategies and Diplomatic Manoeuvring
India must adopt a multi-pronged strategy to maintain strategic parity with China as the latter continues to enhance its military capabilities. This involves a four-pillar approach, focusing on defence modernization, border infrastructure, strategic partnerships, and diplomatic confidence-building.
To counter China’s technological and numerical advantage, India must incrementally increase its defence budget, which currently stands at ₹6.81 lakh crore approximately 1.9% of GDP. This needs to be raised to at least 2.5-3% to meet future security challenges. Investments in high-tech military domains like Artificial Intelligence (AI), cyber defence, and advanced missile systems are crucial, as the global AI military market is expected to reach $13 billion by 2028. Strengthening domestic production under “Make in India” is essential. To drive innovation, R&D funding for DRDO must be increased from 6% to at least 10%. Further, India’s military capabilities will be enhanced through procurement of 114 multi-role fighter aircraft (MRFA), nuclear-powered submarines, and advanced artillery systems.
Given the heightened tensions along the Line of Actual Control (LAC), strengthening border infrastructure is a critical priority. The construction of over 60 key roads and tunnels is in progress to improve troop mobility. Enhancing border surveillance with additional radars, UAVs, and night-vision cameras will provide better situational awareness and rapid response capabilities.
India’s strategic partnerships are vital in countering China’s growing influence. Strengthening Quad (India, USA, Japan, Australia) alliances, participating in joint military exercises like Malabar, and signing $20 billion in defence agreements with allies in the last decade are crucial steps. Military cooperation is being reinforced through BECA, LEMOA, and COMCASA agreements with the US. Furthermore, India’s defence exports have risen to ₹16,000 crore ($1.9 billion) in 2023, with an ambitious target of ₹35,000 crore ($4.2 billion) by 2025, showcasing its growing presence in the global arms market.
Diplomatic engagement is crucial for preventing miscalculations and managing escalation risks with China. Establishing regular high-level summits, working groups, and military hotlines will help in conflict resolution. Confidence-building measures, including transparency in military deployments and joint exercises along the LAC, must be actively pursued. Agreements on buffer zones and disengagement strategies will help prevent future standoffs. Additionally, bilateral commissions to monitor the LAC will ensure a structured crisis management framework to defuse tensions before they escalate.
A Bold Leap Towards ‘Viksit Bharat’
India’s Union Budget for FY 2025-26 marks a historic milestone with a record ₹6.81 lakh crore allocation for the Ministry of Defence a 9.53% increase from the previous fiscal year, constituting 13.45% of the entire budget. This exceptional investment underscores Prime Minister Narendra Modi’s vision of Viksit Bharat by 2047, aiming to transform India into a technologically advanced, self-reliant global power. This bold move not only modernizes the armed forces but also strengthens national security in an evolving geopolitical landscape. The budget prioritizes cutting-edge technology, indigenous defence production, and R&D in cyber warfare, AI, and robotics enhancing India’s strategic edge while reducing foreign dependence.
Beyond defence, the allocation serves as a channel for socio-economic development, fostering job creation, industrial growth, and opportunities for youth, farmers, and women. By integrating national security with economic self-sufficiency, India confirms its commitment to sovereignty, innovation, and global leadership.
A Shift Towards Modernization and Self-Reliance
India’s record defence allocation for FY 2025–26 underscores a strategic push towards military modernization and self-reliance under the “Make in India” initiative. The total defence budget includes a significant Rs 1.80 lakh crore (26.43% of the total allocation) dedicated to capital outlay, aimed at strengthening the country’s military capabilities across land, air, and sea. The allocation of Rs 1,48,722.80 crore for capital acquisitions includes 75% (Rs 1,11,544.83 crore) designated for procurement from domestic sources. This move is designed to reduce reliance on foreign arms imports and boost India’s indigenous defence manufacturing ecosystem. Additionally, Rs 27,886.21 crore has been designated for private Indian defence firms, further enhancing local industry participation and innovation.
The Indian Air Force’s modernization drive is focused on closing the technological gap with global powers, particularly China, which has already fielded the J-20 5th-generation fighter and is testing 6th-generation prototypes. India’s investment in indigenous aircraft programs like the Advanced Medium Combat Aircraft (AMCA) and upgrades to the Light Combat Aircraft (LCA) series will play a crucial role in achieving self-sufficiency. Additionally, funds will be allocated to acquire Long Endurance Remotely Piloted Aircraft (RPAs) to enhance surveillance and strike capabilities, vital for securing India’s airspace and border regions.
For strengthening Blue-Water Dominance India’s naval modernization is a direct response to China’s expanding maritime influence. The budget includes significant funding for the acquisition of next-generation frigates, destroyers, and potentially nuclear-powered submarines. In contrast, China’s People’s Liberation Army Navy (PLAN) continues rapid modernization, deploying aircraft carriers like the Liaoning and Shandong, along with stealth destroyers and advanced missile systems. By investing 75% of its modernization funds in domestic procurement, India is ensuring a stronger, self-reliant naval force capable of countering regional threats.
The Indian Army’s advancement strategy extends beyond conventional weapons to embrace robotics, unmanned ground vehicles, and AI-driven command systems. Enhanced investments in digital networks and smart battlefield management systems will enable faster decision-making and improved situational awareness. Additionally, increased funding for the Border Roads Organisation (BRO) will strengthen border infrastructure, ensuring rapid troop deployment and logistical efficiency along contested areas like the Line of Actual Control (LAC) with China.
India’s heavy investment in domestic procurement is a strategic move to reduce dependence on foreign suppliers, particularly Russia, which has historically been a key defence partner. The Rs 1,11,544.83 crore allocated to domestic manufacturing is expected to boost Indian defence giants like Tata Advanced Systems, Bharat Forge, and L&T Defence, fostering a strong ecosystem for innovation. In contrast, China’s defence spending, growing at a steady 7.2%, prioritizes stealth, cyber warfare, and advanced missile systems, giving it a technological edge. To bridge this gap, India is promoting initiatives like iDEX, which encourages start-ups and private firms to contribute to defence innovation, creating a long-term multiplier effect on industrial and economic growth.
India’s commitment to self-reliance in defence manufacturing is crucial not only for maintaining credible deterrence along the LAC and Indo-Pacific but also for securing greater strategic autonomy in an evolving global security landscape. By channelling resources into indigenous military capabilities, India is setting the foundation for a self-sufficient, technologically advanced, and globally competitive defence sector ensuring long-term security and economic benefits for the nation.
Powering India’s Defence Modernization
India’s latest budgetary allocations for defence research and development (R&D) signal a strategic push toward self-reliance and technological superiority. With a 12% increase in the defence R&D budget, the government is directing substantial resources toward innovation, aiming to strengthen the armed forces with cutting-edge capabilities. This investment is not just about gaining ready-made systems but about fostering homegrown advancements in Artificial Intelligence (AI), Machine Learning (ML), and Robotics to ensure long-term technological self-sufficiency.
A major highlight of this initiative is the Rs 449.62 crore allocation to the Innovation for Defence Excellence (iDEX) scheme. This funding has almost tripled over the last two years, reflecting the government’s commitment to boosting private sector involvement in defence technology. iDEX prioritizes projects in autonomous systems, unmanned aerial vehicles (UAVs), and cybersecurity solutions, aiming to transform emerging ideas into deployable military assets. This approach reduces reliance on foreign defence imports while strengthening indigenous capabilities.
Beyond iDEX, the increased R&D budget is set to benefit key defence organizations such as the Defence Research and Development Organisation (DRDO), Hindustan Aeronautics Limited (HAL), Bharat Electronics Limited (BEL), Bharat Dynamics Limited (BDL), Mazagaon Dock Shipbuilders Limited (MDL), Goa Shipyard Limited (GSL), and Cochin Shipyard Limited (CSL) and many more. With expanded financial backing, these institutions can accelerate the development of next-generation fighter jets, advanced naval vessels, sophisticated missile systems, electronic warfare tools, cyber defence mechanisms, and space-based surveillance platforms. By focusing on indigenous research, India is striving to become a global defence technology hub.
This heightened focus on R&D is also aligned with the broader vision of an ‘Aatmanirbhar’ (self-reliant) military under the “Viksit Bharat @ 2047” initiative. The government’s emphasis on domestic innovation is expected to have widespread economic benefits, including job creation, skill development, and stronger public-private collaborations. Additionally, these efforts will be crucial in bridging the technological gap with adversaries, especially as China continues its sustained investment in military advancement.
Ensuring Stability and Morale
Operational readiness for India’s armed forces extends beyond cutting-edge weaponry and advanced platforms it relies on a strong and dependable logistical support system. In the FY 2025-26 budget, the government has allocated ₹3,11,732.30 crore on the revenue side, reflecting a 10.24% increase over the current fiscal estimates. This increase is particularly significant for non-salary expenditures, ensuring the seamless functioning of essential services such as ration supply, fuel procurement, ordnance stores, and maintenance of critical equipment. Out of this allocation, ₹1,14,415.50 crore has been earmarked specifically for these operational necessities. This financial commitment strengthens the armed forces’ ability to sustain deployments and execute rapid responses, especially in remote and strategically sensitive border areas, where logistical efficiency determines operational effectiveness.
Simultaneously, social welfare initiatives form a crucial aspect of India’s defence policy, directly influencing the morale and long-term well-being of both serving personnel and veterans. Recognizing this, the Defence Pension allocation has been increased by 14%, reaching ₹1,60,795 crore. This increment is essential for nearly 34 lakh pensioners, ensuring they receive adequate financial support to maintain a dignified standard of living. Furthermore, this increase reinforces the One Rank One Pension (OROP) policy, which upholds fairness and parity among retired personnel. In addition to pensions, healthcare remains a priority for the welfare of ex-servicemen. The budget allocates ₹8,317 crore for the Ex-Servicemen Contributory Health Scheme (ECHS), which provides quality medical care to veterans and their families. Given the long-term health challenges faced by many ex-servicemen, this funding ensures they continue to receive timely and effective medical treatment. Overall, the increased budgetary allocations underscore the government’s dual commitment enhancing operational readiness while safeguarding the welfare of those who serve and have served the nation.
In conclusion, 2025 marks a turning point in global defence as nations channel record-breaking military spending now at $2.46 trillion into confronting emerging security threats and harnessing rapid technological advancements. While China’s steady, technology-focused spending continues to modernize its armed forces across multiple domains, India’s ambitious budget, driven by initiatives like “Viksit Bharat,” underscores a decisive shift toward self-reliance and domestic innovation. These divergent strategies not only reflect each country’s unique security imperatives and economic constraints but also highlight the broader global challenge: balancing fiscal prudence with the need to invest in cutting-edge capabilities that can ensure both national defence and long-term economic stability. As geopolitical tensions persist and technological competition intensifies, the ability of nations to modernize their forces and foster strategic partnerships will ultimately shape the security landscape of the future.
