India is facing significant challenges in balancing its defence spending and military modernization amid evolving regional security dynamics and global geopolitical shifts. The country’s defence budget saw a notable increase this fiscal year, rising by 15%, signaling a break from the relatively modest growth aligned with nominal GDP observed in recent years. This shift comes against the backdrop of heightened concerns about two-front warfare, following operations such as Op Sindoor, which brought the threat of simultaneous conflict on multiple borders into sharper focus.

India’s military modernization efforts currently reflect a complex and somewhat fragmented approach. The three service branches—the army, navy, and air force—continue to develop capabilities largely in isolation, leading to overlapping procurements and a sprawling conventional force structure reminiscent of mid-20th century warfighting concepts. The desired force structure envisages over 1.2 million active personnel, nearly 5,000 main battle tanks, 42 fighter squadrons, three aircraft carriers, and over 30 submarines, including nuclear-powered vessels. However, these ambitious targets strain the available budget and complicate efficient resource allocation.

Recent high-value acquisitions underscore this challenge. The Indian Army has inducted a squadron of six Apache attack helicopters at a cost of approximately $1 billion, despite the Indian Air Force already operating 22 such platforms. Other major procurements include 114 Rafale fighter jets estimated at $30 billion, 26 Rafale-M naval fighters costing about $8 billion, six German-built Type 212 submarines for $10 billion, and a substantial replenishment of tactical munitions from Israel valued at $7–8 billion. A notable characteristic of many of these procurements is their reliance on imported technology, raising concerns about long-term dependencies.

India’s defence expenditure has historically skewed toward foreign acquisitions, with limited domestic value addition beyond assembly operations under license production. Unlike countries such as the United States, China, Russia, or Israel, where defence spending stimulates local industry and contributes to broader economic growth, India's defense imports act more like a fiscal burden, exerting a “tax-like” effect on the economy rather than multiplying industrial capacities. This reliance creates vulnerabilities, as imported platforms often require exclusive maintenance, munitions, and upgrades tied to the original equipment manufacturers abroad. For instance, the Rafale jets depend on French-origin ammunition and upgrade services, exemplified by a recent $50 million per piece upgrade project for the Mirage 2000 fleet with its manufacturer, Dassault Aviation.

Operational demands exacerbate these issues. Periodic border tensions have compelled India to seek munitions replenishment from international suppliers repeatedly, with Op Sindoor alone necessitating a roughly $1 billion restock of S-400 missile surface-to-air systems. This sustains the pressure on defence finances and disrupts strategic readiness.

In contrast to this import-dependent procurement strategy, India’s domestic defence research and development sector remains underfunded and underperforming. The Kaveri aero-engine project, the country’s primary indigenous engine initiative, has received approximately $300 million in funding over three decades, reflecting the limited investment available for breakthrough technologies. Meanwhile, competitors like China are advancing rapidly in areas such as artificial intelligence, quantum computing, and cyber warfare capabilities.

Experts argue that India must adopt a more focused and asymmetric defence posture that prioritizes selective modernization and strengthens indigenous production. Drawing parallels with historical strategies advocated by figures such as Chinese missile pioneer Qian Xuesen, India’s future approach could emphasize missile forces and nuclear deterrence to compensate for conventional force limitations and reduce economic strain.

With considerable geopolitical challenges and constrained resources, India’s defence strategy hinges on achieving a more integrated, economically sustainable, and innovation-driven military modernization program to address both current threats and future security landscapes.