An orchestrated attack on India’s Pahalgam. A counter strike ‘Operation Sindoor’ by India. Nights of drone attacks by Pakistan and retaliatory responses from India. And then a ceasefire declaration, violated within hours, before it all slowly came to a halt. This was the most recent instance of the escalation of conflict between the two neighbouring counties – India and Pakistan.
Ever since the partition in 1947, the two countries have a history of rivalry, one of the most enduring and complex in modern international relations, rooted deeply in history, politics, and territorial disputes. While there is calm at the borders now, recent escalations have led to both India and Pakistan prepping up in terms of their military prowess.
India vs Pakistan: Defence expenditure ramped up
Just weeks after coming to the brink of a fifth war with archrival India, Pakistan announced a major boost to defence spending in its new budget. For the fiscal 2025-26, Pakistan ramped up defence spending to Rs 2.25 trillion ($9 billion), up 20 per cent from the previous fiscal year. For the current fiscal, India too increased its defence expenditure and allocated approximately $78.7 billion, reflecting nearly a 10 per cent increase from the previous year.
Even so, India’s defence expenditure significantly outpaces Pakistan’s. Approximately 8 times over. In 2024, India’s military spending was nearly nine times that of Pakistan’s expenditure, according to a Swedish think-tank Stockholm International Peace Research Institute (SIPRI).
India’s defence outlay – Surge in budget, production, exports and strategic focus
India’s defence spending in 2025-26 (April-March) was set at Rs 6.81 lakh crore (approx $78.7 billion), which was 9.5 per cent higher than the previous year. This includes Rs 4.88 lakh crore for revenue expenditure, and Rs 1.92 lakh crore for capital expenditure. In the previous financial year, Rs 6.21 lakh crore was allocated for the Ministry of Defence (MoD).
India’s defence budget has seen a steady rise over the years, growing from Rs 2.53 lakh crore in FY14 to the current Rs 6.81 lakh crore.
Additionally, the Border Roads Organisation (BRO) is also slated to get a funding boost aimed at improving infrastructure in critical border regions. This allocation underscores a strategic focus on strengthening national security and defence readiness.
Not just the spending, India has, over the years, witnessed major changes in the defence sector – from indigenisation, to involvement of the private sector, to new-age technologies. The results now are striking. Record-breaking production, a surge in exports, targeted investments, and landmark defence contracts, each pointing to a defence ecosystem on the rise.
According to government data, India’s defence manufacturing witnessed a transformation in the last 11 years. In 2023-24, the country recorded its highest ever defence production at Rs 1.27 lakh crore, posting a rise of 174 per cent compared to Rs 46,429 crore in 2014-15. In FY25, defence exports had reached Rs 15,233 crore from the private sector and Rs 8,389 crore from DPSUs.
However, despite the progress in indigenous weapons, India still depends heavily on arms imports. According to SIPRI, India is the world’s second-largest arms importer, with an 8.3 per cent share between 2020 and 2024. Russia is India’s biggest arms supplier, accounting for 36 per cent of its weapon imports. But India is now buying more weapons from other countries like France, Israel, and the US, as its reliance on Russia has gradually decreased.
On July 7, Defence Secretary RK Singh had told CNBC-TV18 that India is looking at increasing the defence expenditure in the coming years to 2.5 per cent of the GDP. “We will seek to increase defence expenditure share in GDP from 1.9 per cent to 2.5 per cent.”
Pakistan’s defence outlay – Military budget surged, civil spending slashed
Pakistan has significantly increased its defence budget for 2025-26, just weeks after a near-conflict with India. The new budget for the fiscal year 2025-2026 announced by the government in June raised military spending to Rs 2.55 trillion ($9 billion), a 20 per cent jump from the previous year. Earlier, a Reuters report had maintained that a 20 per cent boost in defence spending was expected by economists, who had maintained that it would likely be offset by cuts in development spending.
And the hike in defence expenditures did come amid a cut in overall spending, which is shrinking by 7 per cent to Rs 17.57 trillion ($62 billion). The budget reflected Pakistan Prime Minister Shehbaz Sharif’s goals of spurring growth while boosting Pakistan’s military in the wake of the most serious conflict between the nuclear-armed neighbours in nearly three decades.
It is worth noting here that Pakistan’s domestic economic struggles limit its capacity to raise defence spending, forcing it to depend on foreign assistance and loans, especially from the IMF, China, and the US. Very recently, on May 9, the International Monetary Fund (IMF) approved the immediate disbursement of about $1 billion to Pakistan under the ongoing Extended Fund Facility.
India vs Pakistan- Where do they stand as military spenders globally
According to the Global Firepower Index, India is recognised as one of the world’s leading military powers, ranking fourth with a PowerIndex score of 0.1184 while Pakistan stands 12th with a score of 0.2513. Here are a few parameters which compare the two neighbouring countries:
Manpower: With a population of over 1.4 billion, India commands an available manpower pool of 662 million. In comparison, Pakistan has a population of over 252 million with an available manpower pool around 108 million. Active personnel: 1.45 million (India) vs 654,000 (Pakistan).
Air Power: India operates 2,229 aircraft, including 513 fighters and 130 attack aircraft. Pakistan, in contrast, fields 1,399 aircraft with 328 fighters and 90 attack aircrafts.
Land Forces: India boasts 4,201 tanks and 148,594 armored vehicles, as against Pakistan’s 2,627 tanks and 17,516 armored units. However, Pakistan does hold a lead in mobile rocket systems at 600 as compared to India’s 264.
Naval forces: India’s navy dominates the region with a fleet of 293 ships, including 2 aircraft carriers, 18 submarines, and 13 destroyers. In contrast, Pakistan has 121 vessels and does not possess any carriers or destroyers.
Increase in defence expenditure at the expense of growth and citizens?
According to the International Monetary Fund (IMF) data, while India’s GDP per capita stands at $12.13 thousand in 2025, Pakistan’s is approximately $6.95 thousand, significantly lower than India’s. On average, this indicates a gap between the purchasing power parity of the two countries wherein Indians on an average earn 70 per cent more than their Pakistani counterparts. The gap reflects deeper income inequality, lower productivity, and slower economic growth.
Why is this significant here? It is worth noting that when Pakistan’s Finance Minister Muhammad Aurangzeb presented the annual union budget on June 10, he proposed a 20 per cent increase in the country’s defence budget while shrinking the overall spending by 7 per cent. Post the new announcement, Pakistan’s allocation to its three armed forces amounted to 1.97 per cent of the country’s GDP, up from 1.7 per cent in the previous budget.
Was it wise? According to analysts who talked to Al Jazeera, Islamabad will need to walk a fine balance in spending more on defence at a time when its fragile economy is under strict oversight from the IMF, and cuts in social sector expenditure could embolden the opposition.
While India too had raised its defence budget earlier this year, unlike New Delhi, Islamabad confronts pressure from the IMF. The fund transfer from the global institution requires Pakistan to work in accordance with IMF’s guidelines – streamline its expenditure, reduce subsidies and improve the efficiency of its governance structures.
Another economist told Al Jazeera that the increase in the defence budget was “inevitable and necessary,” but cautioned that the Pakistan government must be careful not to sacrifice long-term development.
However, considering the army being seen as the most powerful institution in Pakistan’s defence and political spheres, the money being directed towards it was only expected. The army has received Rs 1.17 trillion ($4.1 billion), accounting for nearly 46 per cent of the total defence budget. The air force and navy received just more than Rs 520 billion ($1.8 million) and Rs 265.9 billion ($941 million) respectively.
India’s defence budget gaining from strong economic growth
India’s approach to defence funding is closely tied to the trajectory of its economic growth. As the Indian economy has expanded, the government has consistently increased its defence budget. India’s GDP growth reached a four-quarter high of 7.4 per cent in the final quarter of FY25. For the full-year FY25, growth was recorded at 6.5 per cent. The economy, according to government data, was boosted by strong investment demand, largely driven by government spending.
Interestingly, India’s GDP has almost doubled in the last 11 years. According to IMF data, in 2014, India’s GDP was estimated at $2.0 trillion which went up to an estimated $3.9 trillion in 2024. This is slightly higher than that of Japan which is estimated at $4,186.431 billion. This will take India from its current fifth position to fourth place by the end of 2025.
As both countries continue pouring billions into their defence budgets, a critical question arises: what is the price of this buildup?