GlobalData forecasts India defense expenditure to grow at 4.3% CAGR through 2027

The necessity to modernize military due to constant territorial disputes with neighbors China and Pakistan, coupled with a desire to project itself as a global power, is driving India’s defense budget. As a result, the country’s defense expenditure, including pensions, is anticipated to grow at a compound annual growth rate (CAGR) of 4.3% from $72.1 billion in 2023 to $85.3 billion in 2027, forecasts GlobalData, a leading data and analytics company.

GlobalData’s latest report, ‘India Defense Market Size and Trends, Budget Allocation, Regulations, Key Acquisitions, Competitive Landscape and Forecast, 2022-27’, reveals that India’s defense acquisition and R&D spending recorded a CAGR of 10.2%, from $13.4 billion in 2018 to $19.8 billion in 2022. This increase in India’s acquisition budget is largely attributed to the adoption of deferred defense procurements in 2020, 2021 and 2022 and an increase in R&D investment. India’s strong economic growth over the last decade has also contributed to the growth of its defense industry.

Akash Pratim Debbarma, Aerospace & Defense Analyst at GlobalData, comments: “India’s rivalry with China and Pakistan along with its need to modernize its defense inventory has not only acted as a driver for an increasing defense budget but also ignited a desire to boost its domestic defense industry and investments into R&D. In addition, the $375 million BrahMos cruise missile deal with the Philippines earlier this year has given India a ray of hope to emerge as a global export leader in the near future.”

As part of the plan to modernize its military capabilities and replace its aging fleet, India requires a strength of 42 squadrons of modern combat aircraft, each squadron consisting of 16-18 units of aircraft.

After the successful completion of the deal between Dassault and India to attain 36 units of Rafales forming two squadrons of the 4.5 generation aircraft this year, India is set to purchase 18 more units of foreign combat aircraft to build its third squadron of foreign built modern combat aircraft.

Debbarma comments: “Even though Boeing’s F-15EX and F/A-18 Block III Super Hornet, as well as Saab’s JAS-39 Gripen and Lockheed Martin’s F-21, are competing with Dassault’s Rafale for this deal, India should procure 18 more units of Rafale since two squadrons of the same aircraft are already in service. It will not only minimize the training cost but also prove to be economical in terms of maintenance and other operational expenses.”

Considering the security challenge posed by the expanding influence of the Chinese People’s Liberation Army Navy (PLAN) in the Indian Ocean Region, India has decided to modernize and expand its naval capability. Specific emphasis is being placed on developing the blue-water capabilities of the Indian Navy.

Debbarma concludes: “India’s priority to build up to six nuclear-powered attack submarines is not only a means to modernize its naval prowess but will also prove to be a lethal weapon in securing its exclusive economic zones and territorial waters. These nuclear-powered submarines are a strategic move needed to deter Chinese forays into India’s area of influence.”

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