South Asia Investor Review

Last year, India decided on a massive 34% increase year-over-year in its defense spending. Here are some frequently asked questions and answers about this dramatic move that puts India among the world's biggest spenders on defense. Q1: How much does India really spend on defense? A1: On paper, India spends $32.7 billion , about 3% of its GDP on defense, after an increase of 34% for 2010. In reality, India spends closer to 3.5% of its GDP on defense. Here's what Col.(Retd) Pavan Nair of the Indian Army has to say about it in a recent guest post on Haq's Musings : India's own specified limit of 3% has been observed only by excluding several items like the cost of the MoD and the expenditure on military pensions which by itself amounts to 15% of the total defense outlay. Several other items like the Jammu and Kashmir Light Infantry (JAKLI, a regular regiment of the army consisting of thirteen battalions) and the Coast Guard are also excluded. A substantial part of the co...

India is planning to raise its military budget by 50% to almost $40 billion, making military expenditure 3% of the annual gross domestic product (GDP), the Indian defense minister said. "Our current defense spending is lower than 2% [of GDP]...and it should be at least 3%," A. K. Antony said at a meeting with top military commanders on Tuesday, without specifying a time-frame. India raised its defense spending in February by 10% to $26.5 billion for the fiscal year 2008-2009, but it still fell below 2% of GDP for the first time in at least a decade. India's neighbors and long-term rivals, Pakistan and China, allocate around 3.5% and 4.3% of GDP to defense, respectively. The minister said top priority must be given to the modernization of the Indian Armed Forces and half of the defense budget should be allocated for the purchase of new military equipment. Currently two-thirds of India's budget is allocated for military, paramilitary, police, various security forces an...