India has become the world’s fourth largest spender on defence, following a 13.1% increase in its 2016-17 defence budget, according to US research firm IHS Inc.

• India’s rise in the rankings from sixth position last year is a result of an increase in expenditure to $50.7 billion, combined with cuts to military spending by Russia and Saudi Arabia, where low oil prices have put considerable strain on their finances.
• According to IHS analysis, short-term pressures, caused by increases to military pay and the introduction of one rank, one pension (OROP) are the main reasons for the higher rate of growth in budget allocation to defence.
• As a result, spending on the acquisition of military equipment remained largely static in real terms and remains lower than its 2013-14 peak, despite an increase in the overall budget.
• The Indian defence budget is expected to reach $64.8 billion by 2020 with procurement expenditure expected to grow faster than overall spending, according to IHS.
• India’s aerospace and defence market is among the most attractive globally and the government is keen to leverage this advantage to promote investments in the sector.

According to a report released by PricewaterhouseCoopers Pvt. Ltd and industry lobby group Assocham, India ranks among the top 10 countries in the world in terms of its military expenditure and import of defence equipment and it allocates about 1.8% of its GDP to defence spending, of which 36% is assigned to capital acquisitions. However, only about 35% of defence equipment is manufactured in India, mainly by public sector units.

Prime Minister Narendra Modi launched the Make in India campaign in 2014 with the objective of boosting manufacturing and generating employment by focusing on 25 sectors, including defence. The objectives for the defence sector were promoting self-reliance, indigenization, achieving economies of scale, developing capabilities for export, transfer of technology and domestic research and development.