India’s Military R&D Investments: A Global Perspective with India’s Strategic Imperatives

By Shubhangi Palve

“In the midst of chaos, there is also opportunity”

Sun Tzu’s quote resonates strongly amid the current global turmoil marked by conflicts such as the Israel-Hamas war, the Russian-Ukraine conflict, the Armenia-Azerbaijan border dispute, the Civil War in Sudan, and continual diplomatic endeavours to foster peace across many regions. Despite worldwide diplomatic efforts to quell these conflicts, they persist, contributing to a rapidly deteriorating global security landscape. As a result of geopolitical instability, numerous countries, such as the United States, China, Russia, Japan, South Korea, Australia etc. have escalated their defence budgets in recent years. Thus, global arms production and sale numbers are all-time high. The combined arms sales of the top 100 largest arms-producing companies and military services companies totalled USD 597 billion in 2022, according to SIPRI.

India, with the world’s fourth most potent military force trailing only the United States, Russia, and China, is actively preparing for prospective land, sea, and air challenges by prioritizing its indigenous technological prowess. This dedication is evident in India’s significant investments in defence research and development initiatives. Also, India is wagering its budget to establish a new image as an ‘arms exporter,’ shedding the tag of ‘largest arms importer’.

Despite being an interim budget, presented by Finance Minister Nirmala Sitharaman in February 2024, it appears to lay the groundwork for innovation within the defence sector. Following the 2024 general elections, the incoming government will introduce a full budget.

In the latest interim budget, the Ministry of Defence (MoD) remains the top recipient with an allocation of Rs. 6.21 lakh crore (USD 78 billion), representing 13.04% of the total Union Budget. This marks a significant 170% increase since 2014-15, indicating substantial growth over the past decade. In the previous fiscal year, FY 2023-24, the defence budget amounted to Rs. 5.94 lakh crore, comprising 13.18% of the total budget.

Allocation & Initiative for Military R&D 

In the FY 24-25 budget, the Defence Research and Development Organization (DRDO) saw a slight increase in allocation. In FY 2023-24, it was Rs. 23,264 crores, while in FY 2024-25, it has risen to Rs. 23,855 crores, marking an improvement of around Rs. 590 crores compared to last year. Of this allocation, a major share of Rs 13,208 crore is allocated for capital expenditure. This allocation aims to bolster DRDO financially for the development of new technology, with a special emphasis on fundamental research, and to provide support to private entities through the Development-cum-Production Partner framework.

A key focus is on DRDO providing incubation support for startups. Notably, Rs. 60 crores has been allocated to the Technology Development Fund (TDF) scheme, specifically tailored for new startups, MSMEs, and academia. This aims to attract young talent interested in innovation and developing specialised technology in the defence sector, in collaboration with DRDO.

Furthermore, a significant fund of Rs. 1 lakh crore has been allocated to boost Deep Tech development in Defence. “Deep tech” is a term widely used by leading nations worldwide, especially in defence and various other industries, to describe advanced innovation and technology.

This initiative is crucial for the ongoing modernization efforts of the defence forces, which have been a priority for the government for years, aiming to encourage both public and private participation in defence production. These funds can stimulate the creation of new startups and encourage more private investment in technology.

Additionally, in March 2024, the Ministry of Defence initiated the creation of a fund amounting to ₹750 crore under the Acing Development of Innovative Technologies with iDEX (ADITI) scheme at ‘DefConnect 2024’. Start-ups participating in this initiative are eligible to receive a grant-in-aid of up to ₹25 crores to support their research, development, and innovation activities in defence technology.

Exploring Military R&D Spending Among Key Players

The defence budget is often evaluated in relation to the GDP, with the general consensus suggesting it should ideally constitute around 3% of the GDP. However, in FY 24-25, the allocation to defence represents 1.9% of GDP, down from 2.08% in FY 2023-24. This contrasts with the trend observed in many advanced economies, where military spending ranges from 2-5 percent of their GDPs, as reported by the International Monetary Fund. Nevertheless, according to data from the Stockholm International Peace Research Institute (SIPRI), countries engaged in conflicts, such as Russia, Ukraine, Israel, Saudi Arabia, Qatar, Algeria, Armenia, Azerbaijan, Jordan, Kuwait, Libya, and Oman, allocated over 4% of their GDPs to military expenditure in 2022.

Let’s delve into the comparison of military research and development expenditures among global Key Players…

The US Department of Defence (DoD) unveiled its FY 2024 President’s Budget Request on March 13, 2023, amounting to USD 842 billion. This budget allocates a substantial portion, USD 145 billion, to research, development, testing, and evaluation (RDT&E), constituting 15% of the total defence budget. In contrast, the FY 2023 RDT&E budget stood at USD 130.1 billion, representing 16% of the total defence budget of USD 773 billion.

Moving to China, official announcements indicate a military budget of 1.67 trillion yuan (USD 232 billion) for FY 2024. slightly surpassing the previous year’s allocation of 1.55 trillion yuan (USD 215 billion). The government plans to allocate 371 billion yuan (USD 52 billion) towards science and technology, marking a 10% increase from the previous year.

However, suspicions linger regarding China’s actual defence expenditure, possibly exceeding officially stated figures by a significant margin. This opacity complicates accurate assessments of China’s military R&D spending, especially given its rapid advancements in military capabilities. However, according to Western estimates, China’s real defence budget could surpass double the officially declared amount, indicating a substantially larger budget than what is publicly acknowledged.

China’s swift progress in military capabilities sparks concerns regarding the transparency of its defence budget and off-budget expenditures. Despite China’s claims that its RDT&E costs are part of its equipment budget, the significant advancements and military expansion imply that off-budget expenditures could be substantially greater. The blend of restricted transparency and military-civilian integration leads to a significant portion of undisclosed spending on research and development.

Russia, ranking third in global military expenditure, has outlined a three-year federal budget for 2024 to 2026 amidst ongoing conflicts against Ukraine.

According to SIPRI data, Russia’s national defence budget for 2023 stood at 6,406,703 million roubles (approximately USD 70,474 million). Projections for fiscal year 2024 indicate an increase to 10,775,442 million roubles (approximately USD 118,531 million), followed by 8,534,144 million roubles (approximately USD 93,876 million) for 2025 and 7,408,964 million roubles (approximately USD 81,499 million) for 2026.

In 2023, Russia allocated 406,046 million roubles (approximately USD 4,467 million) to applied R&D, accounting for 6.34% of the total defence budget. Projections for fiscal years 2024, 2025, and 2026 are 396,233 million roubles (approximately USD 4358 million), 324,966 million roubles (approximately USD 3575 million), and 345,510 million roubles (approximately USD 3801 million) respectively.

As per the Swedish Defence Research Agency (FOI), Russia’s military R&D infrastructure comprises three primary types of organizations: research institutes, design bureaus, and scientific production associations. Collectively, this infrastructure encompasses around 600 organizations, including approximately 300 research institutes, nearly 130 design bureaus, and roughly 170 scientific production organizations.

Overall, while the US maintains a significant focus on R&D investment, China’s rapid military advancements and Russia’s substantial defence budget underscore the importance of monitoring global military R&D spending for strategic insights.

The comparison with China and the US serves as a reminder of the importance of continuous investment in defence R&D to ensure national security and technological advancement.

India’s Focus on Long term goals

Research and development in key military domains such as artificial intelligence, directed energy, hypersonic systems, biotechnology, quantum science, cyberspace capabilities, and space technology are essential for national security and offer the potential for significant advantages in warfare. With technology playing an increasingly crucial role in modern warfare, India aims to invest in futuristic technologies. India’s focus on key military technologies and its investment in R&D reflect its long-term strategy, despite facing challenges in fund allocation and funding gaps.

India’s focus on essential military technologies and its investment in R&D reflects its long-term strategic vision. However, challenges exist in allocating funds and addressing funding gaps.

In August 2023, the Government of India formed a nine-member committee to overhaul the Defence Research and Development Organisation (DRDO), the primary agency for defence R&D. Led by Prof. Vijay Raghavan, former Principal Scientific Advisor to the Government of India, one of the committee’s recommendations is for DRDO to prioritize its core research and development goals for defence while avoiding involvement in productization, production cycles, and product management. According to the Raghavan committee’s findings, two-thirds of the 175 DRDO projects analyzed by the CAG faced difficulties in meeting their scheduled timelines, leading to extensions ranging from 16% to 500%.

To address these issues and focus on Military R&D, the committee proposed decommissioning redundant projects and DRDO labs, unlocking substantial physical assets that could be repurposed to establish a fund dedicated to fostering innovation.

Opportunity as an exporter

India sees an opportunity to expand its defence exports through the boost in defence production but realizes that achieving this goal requires a focus on research and development. Raksha Mantri Shri Rajnath Singh emphasized the government’s commitment to long-term gains rather than short-term outcomes, aiming to make India a developed nation by 2047. Seven-eight years ago, defence exports did not even touch Rs 1,000 crore. Today, it has touched Rs 16,000 crore. By 2028-29, annual defence production is expected to touch Rs 3,00,000 crore and defence exports Rs 50,000 crore, he added.

Conclusion:

As global tensions rise and defence expenditures escalate, India’s commitment to bolstering its defence capabilities through R&D investments underscores its strategic vision. Investments in research and development, domestic manufacturing and incentivizing locally-made products can help retain money and intellectual property within the country, leading to economic benefits. This approach aligns with India’s ambition to become self-reliant in defence production and enhance its stature as a defence exporter.

Nevertheless, obstacles persist, notably in the distribution of budgetary resources. Although India demonstrates the potential in stimulating innovation and cooperation in defence technology, it needs to bridge disparities in both public and private funding to fully exploit its capabilities in the international defence sector. 

Shubhangi Palve is an independent journalist specializing in Defence & Aerospace. Until recently, she worked as a Staff Writer at ET Prime. In this capacity, she focused on covering Defence strategies and the Defence Sector from a financial perspective. She offers more than 14 years of extensive experience in the media industry, spanning print, electronic, and online domains.