India Sets up Non-Lapsable Fund for Defence Modernisation

The recent financial injection follows the government allocation of ₹1.60.000 Crores ($19.4bn) for the modernization of the armed forces in the February 2023 Union Budget, showcasing a substantial 57% increase since 2019/20.

Under these initiatives, the Indian Ministry of Defence (MoD) is set to bolster its military capabilities by introducing a range of equipment, including main battle tanks, air defense gun systems, missiles, naval vessels, submarines, multi-role aircraft, transport helicopters, and attack helicopters.

Furthermore, strategic upgrades are planned for the C4I2SR (command, control, communications, computers, intelligence, information, surveillance, and reconnaissance) systems, maritime surveillance, and anti-submarine warfare capabilities. The long-delayed Future Infantry Combat Vehicle (FICV) program of the Indian Army is slated for acceleration, alongside expediting the Army Tactical Communication System program.

Projections indicate a significant rise in Indian defense spending, growing from $80.5bn to $97.7bn between 2024 and 2028, demonstrating a compound annual growth rate (CAGR) of 5%. This stands in stark contrast to the slower CAGR of 3.6% observed since 2019, primarily attributed to economic constraints.

The decision to allocate increased funds for modernization aligns with the global trend of bolstering defense capabilities in response to heightened security concerns within an unstable geopolitical landscape.