In the Union Budget 2025-26, allocations to the defence sector stand at ₹6.81 lakh crore, which means a year-on-year (YoY) increase of 9.53%. While defence revenue expenditure is set to increase by 24.25%, the capital outlay is 4.65% higher than the Budget estimates of the preceding fiscal year (FY). Since the last FY, the total capital Budget allocation has been represented under a single head of ‘Defence Services’ instead of the earlier convention of representation under separate heads of the Army, the Navy and the Air Force. Nonetheless, there is unlikely to be a substantial difference in the share of each of the forces in total defence spending given the decades-long trend of nearly similar percentages of disbursals to the three services.
While the last decade has seen capital outlays to the Indian Navy rise annually by 10%, concomitant to the rising total defence modernisation budget, the decades long fact is that the Indian Navy receives the lowest funds of the three services in each FY. From FY 2013-14 to 2023-24, the Navy’s share increased by 0.4%. In contrast, the share of the Indian Army in total defence spending today is over double that of the Navy’s.
Impact on Navy’s modernisation
The Navy’s long-drawn measly share of less than 20% has affected its operational requirements. This is also evident with the 2024 report of the Standing Committee on Defence (SCOD) having noted that the existing shortfall in the Navy’s assets vis-à-vis submarines, naval aircraft, and helicopters. The resource crunch is so acute that expenditure on new modernisation schemes has been lesser than committed liabilities. Besides foreclosing some big-ticket projects, the budgetary inadequacy has also seen the Ministry of Defence force the Navy to cut down on various planned procurements, including mine countermeasures vessels (MCMVs), helicopters and and landing platforms docks (LPDs). In 2020, the Navy informed SCOD of the shortfall in platforms such as Aircraft carriers, MCMVs, and LPDS, among others. Moreover, while the Navy had the aim of becoming a 200 warship force by 2027, the Budget cuts changed this target to a 175-200 ship fleet by 2035. Consequently, despite indigenisation efforts, budgetary inadequacy has hit the Navy’s modernisation, affecting operational preparedness.
Need for enhanced capital outlays
The modernisation of the Indian Navy is undertaken commensurate to the assets required and based on envisaged tasks and missions, available platforms, and areas of interest. Hence sustained funding for projects with long-gestation periods including a host of ongoing and planned remains imperative. Besides 63 warships under construction, the Navy also has initial approval for another 31 warships, including seven new-generation frigates, eight corvettes and six conventional submarines. Attaining a target of complete naval indigenisation by 2047 warrants New Delhi’s imminent focus ‘move’ and ‘fight’ categories of equipment, currently with 60% and 50% of indigenous content, respectively. In tandem with this, manufacturing entities such as the Centre for Indigenisation and Self Reliance, which are undertaking complete indigenisation of key foreign origin Navy platforms such as INS Vikramaditya, and the Scorpene submarines require consistent capital flow in the coming years.
India might have made considerable headway in terms of surface vessels such as guided missile destroyers, and frigates, but platforms that are the primary means of power projection and deterrence remain inadequate. With just two air carriers and nuclear-powered ballistic missile submarines (SSBN) each, and no nuclear attack submarine (SSN), there is no 24×7 deterrence on both the coasts (the Arabian Sea and the Bay of Bengal), with the SSBN also lacking the required missile range to cover Chinese territory. Of the Indian Navy’s submarine fleet of 18 platforms, about half of which are operational at any given time, 11 boats are over three decades old, warranting decommissioning sooner rather than later. This situation has arisen since many projects including submarines have been haunted with excessive delays primarily due to fiscal constraints.
R&D projects
For attaining the indigenisation target, enhancing research and development (R&D) remains imperative to foster a culture of innovation across the industry stakeholders. While the Budget marks a 12% YoY hike to the Defence Research and Development Organisation (DRDO), the amount disbursed to fund R&D projects is just 2% of the total defence budget. Moreover, the last decade has seen the DRDO’s share in the defence budget decrease from 4.7% to 3.8%. Low R and D funding does not bode well for the Defence Ministry’s efforts to leapfrog niche naval technologies via schemes — Innovations for Defence Excellence (iDEX) and the DRDO’s Technology Development Fund (TDF). Currently, while iDEX has been contracted for 171 design and development projects including unmanned, Artificial Intelligence-based and undersea communication systems, 97 major equipment-based projects are ongoing through TDF.
With evolving warfare, operational flexibility and versatility have become indispensable, afforded through critical technologies. Thus capex allocations to the DRDO should be suitably enhanced for the scalable technological upgrades for ongoing and future projects that would also facilitate hand-holding and leveraging the private sector through a development-cum-production partner while cutting import dependencies. Attaining a capability base remains essential as indicated by the Navy’s Swavlamban blueprint which lists an array of surveillance, communication, stealth, and offensive future technologies for expeditious indigenisation.
Import dependency
Whereas, insufficient budgetary support has partly resulted in a high import dependency since warships are capital-intensive. Between 2012 and 2022, the Navy’s foreign acquisitions accounted for 38% of the total defence acquisitions. The dependence on naval assets not only entails huge expenditure but also makes national security vulnerable to global supply chain vagaries. This was evident by India’s urgency for leasing naval platforms such as MQ-9B drones in 2020 and the Russian Akula class SSN in 2011, of which India had signed another agreement for lease in 2019. The Russian SSN, which was to be delivered this year, is reportedly delayed to 2028 because of the Russia-Ukraine war, exposing India’s strategic vulnerabilities.
The shadow of China and Pakistan
India’s strategic vulnerabilities are also reflected by the naval postures of China and Pakistan in the Indian Ocean region (IOR). An average of eight to 10 ships, submarines and dual-use ‘research vessels’ of the People’s Liberation Army Navy (PLAN) operate in the IOR annually. Moreover, with Beijing’s Military-Civil Fusion Strategy, there remains a constant apprehension regarding collection of subsurface data by its research vessels for boosting submarine warfare capabilities. China has consistently docked naval assets in India’s periphery while also intruding into its Exclusive Economic Zone, recurringly rattling politico-security circles, including the current Indian Navy Chief, Admiral Dinesh K. Tripathi. Meanwhile, Pakistan which, unlike India, already has Air-Independent Propulsion (AIP)-equipped submarines is set to receive another eight of these platforms (equipped with heavy torpedoes and anti-ship cruise missiles) from China by 2028. PLAN has regular naval drills with its Pakistani counterpart — with the scale of the joint exercises augmented in recent years — which includes unmanned aerial systems that have been previously used by Islamabad for spying in Kashmir.
Thus, it is clear that the Navy’s budgetary share in defence services warrants reappraisal to manage the current imbalance between planned acquisitions and modernisation allocations, meet operational requirements, and mitigate strategic vulnerabilities. The recommendations of the Fifteenth Finance Commission regarding the creation and sources of a non-lapsable defence modernisation fund should be considered as an initial step. The current state of affairs does not bode well for the Indian Navy’s status as the strongest resident force in the IOR, which is likely to become an increasingly contested space going forward.
Araudra Singh is Research Assistant at the Council for Strategic and Defense Research, New Delhi. He is also a non-resident Assistant Editor at the New Jersey-based Consortium of Indo-Pacific Researchers
Published – April 05, 2025 03:30 pm IST