The world is witnessing unprecedented conflicts, from Ukraine to Israel-Hamas and Yemen. NATO has fully mobilized post-Cold War, confronting Russia and China. Global military expenditure hit an all-time high in 2023, driven by increased demands and geopolitical tensions. India’s balanced approach amidst regional threats is noteworthy.

The world continues to see conflicts as never before in recent years. Ukraine, Israel-Hamas, and Yemen continue to see operational action, and death and destruction. The 32-member North Atlantic Treaty Organization (NATO) has been fully galvanised for the first time after the Cold War. West has chosen to confront both Russia and China simultaneously and has driven them together. The war-led demands for weapons have gone up. The growing competition in the Indo-Pacific also means need for greater military spending. The global defence budgets are on the rise. The NATO 2024 summit from 9th to 11th Jul, 2024 once again affirmed and insisted that all its members must spend at least 2 percent of their GDP for defence. Interestingly, a record 23 of 32 NATO members are already spending the targeted percentage. The combined NATO military spending constituted around 55 percent of the global military spend.

Other than the countries in active conflict, many in Europe, East Asia and also South Asia continue to feel threatened. The global military expenditure is expected to continue to rise. Stockholm International Peace Research Institute (SIPRI) has just released the data for the year gone by (2023). The figures showcase global tensions and hotspots. Many states have had record military expenditure increases. The significant increases reflect the high security concerns and need for improving military strength and deterrence. India remains among the highly threatened nations. It has two nuclear armed neighbours, with both it has had serious boundary disputes and fought wars. Yet, the emerging global power has maintained a balance between military spending and developmental expenditure.

Global Defence Expenditure 2023 – Rise in Real Terms

Total global military expenditure reached an all-time high of $2,443 billion in 2023, an increase of 6.8 percent in real terms from 2022. This was the steepest year-on-year increase since 2009. The 10 largest spenders in 2023 were led by the United States, China and Russia, all of who increased their military spending. Russia has had a serious jump in spending due to the Ukraine war. It was the ninth consecutive year of military spending rise. Also it was the first time since 2009 that military expenditure went up in all five of the geographical regions. Particularly large increases were seen in Europe, Asia and Oceania, and West Asia. Clearly, there is deterioration in peace and security. As the states prioritise military expenditure and strength, there is a risk of a spiral effect in their neighbourhoods.

Russia Ukraine Conflict Offshoots

Russia’s military spending increased by 24 percent to an estimated $109 billion in 2023, marking a 57 percent rise since 2014, the year that Russia annexed Crimea. The Russian 2023 military spending was 16 percent of total government spending and 5.9 percent of GDP.

Russia’s military and war-related spending is set to rise sharply in 2024 under new federal budget plans for 2024–26 signed into law by President Vladimir Putin in November 2023. The plans suggest that the Russian government is committed to pursuing the war to a successful conclusion. Some have questioned the economic assumptions though. Russia’s rising debt burden has also meant reduced allocations to some key social spending including housing, education, and healthcare.

Ukraine was the 8th largest military spender in 2023. Yearly spending surged 51 percent to reach $64.8 billion. It represented 58 percent of total government annual spending. Interestingly, this spending was 59 percent of Russia’s defence expenditure, a country eight times its size. Ukraine also received at least $35 billion in military aid during the year, including $25.4 billion from the USA. When combining the two, it became 91 percent of Russian spending.

NATO Defence Expenditure

The USA remains NATO’s major spender but European members increased their share. In 2023 the then 31 NATO members accounted for $1341 billion, equal to 55 percent of the global military expenditure. USA’s military spend rose by 2.3 percent and reached $916 billion in 2023. This was 68 percent of NATO’s total military spend. European NATO members increased their military expenditure, and their combined share was now 28 percent of NATO, the highest in a decade. The remaining 4 percent was by Canada and Turkey.

The perception in Europe is that strong, autocratic and ambitious Putin, and the war in Ukraine has brought Russian threat closer to NATO. The US has been asking Europeans to take greater charge of their security. After all, USA has to concentrate a little more on Chinese expansion and bolster security in Indo-Pacific. Nearly a decade back, the European NATO members had formally committed to target spending 2 percent of GDP on the military. 11 out of 31 NATO members actually hit or crossed the 2 percent level in 2023, the highest number since the commitment was made. The figure has now gone up to 23 of 32 member hitting the 2 percent target. Another target set by NATO was that at least 20 percent of military spending be towards ‘Capital’ expenditure for new equipment. This was met by 28 NATO members in 2023, up from 7 in 2014.

China and its Neighbourhood

China’s military rise is the most watched and analysed subject globally. USA, and China’s neighbourhood, especially India, Japan, South Korea, and the Philippines monitor all military power projection related activities of China. There is a general belief that China spends around 40 percent outside the formal military budget under other code-heads that directly contribute to military power. All the neighbourhood countries increase their defence budgets to reduce the growing military power gap with China.

China continues to be the world’s second largest military spender. The official military budget was estimated at $296 billion in 2023. It was an increase of 6 percent from 2022. It was 29th consecutive year-on-year rise. China’s was half of the total military spending across the Asia and Oceania region.

Japan’s 2023 defence budget was $50.2 billion, an 11 percent increase over 2022. Japan shed its pacifist approach last year. It is relooking at the 1947 enacted Article 9 of their constitution that forbids offensive weapons. It plans to increase its defence budget further and bring it up to 2 percent of GDP by 2027. Taiwan’s military expenditure also grew by 11 percent, reaching $16.6 billion.

During the same period, Pakistan’s military spending dropped to $8.5 billion in 2023, relegating it to the 30th position globally. While it represented a nominal 19.5 percent increase over the revised allocation for 2022–23, the gains were offset by severe economic challenges including the falling value of Pakistan’s currency and high inflation, close to 21 percent.

Conflict Badgered West Asia

War and tensions in West Asia for decades have kept the defence budgets rising. Military expenditure in the region increased by 9 percent to $200 billion in 2023. They highest percentage increase in last decade. Saudi Arabia was the fifth largest spender in the world, and the highest in the region, with spending increasing 4.3 percent from the year prior to $75.8 billion in 2023.

Iran was the 4th largest military spender in the region in 2023 with $10.3 billion. The share of military allocation to the Islamic Revolutionary Guard Corps (defenders of the faith and the regime) grew from 27percent to 37 percent between 2019 and 2023. Israel’s military spend was the second largest in the region after Saudi Arabia. It grew by 24 percent to $27.5 billion in 2023. It was driven by Israel’s large-scale offensive in Gaza in response to the October 2023 Hamas attack. From the warming of diplomatic relations between Israel and several Arab countries in recent years to the new hostilities with Iran backed three ‘H’, Hamas. Hezbollah, and Houthis brought in new dynamics.

Miscellaneous Defence Budget Increases

The largest percentage increase in military spending by any country in 2023 was by the Democratic Republic of the Congo (105 percent), due protracted internal strife. South Sudan recorded the second largest percentage increase (78 percent) amid the Sudanese civil war. Poland’s military spending, the 14th highest in the world, was $31.6 billion and grew 75 percent in one year, the largest annual increase by any European country. Spill-over of Ukrainian war threat was the cause. Poland now considers itself as a NATO frontline state.

Algeria’s military spend grew by 76 percent to reach $18.3 billion, the highest ever, largely due to a sharp rise in revenues from gas exports to Europe who lost Russian supplies. Mexico military expenditure was $11.8 billion in 2023, a 1.5 percent decrease from 2022. In 2023 Brazil’s military spend increased by 3.1 percent to $22.9 billion, and stood at 1.1 percent of GDP. Brazil is considering a constitutional amendment to mandate minimum 2 percent of GDP defence budgeting.

Growing Weapons Demand and Production Dynamics

The US continues to dominate the top defence manufacturing companies. There are six American, three Chinese and one British among top 10 defence contractors. China accounted for the second largest share of combined Top 100 arms revenues by country, at 18 per cent. Ukraine and West Asian conflicts has greatly increased weapon systems and munitions demands. However, despite receiving new orders, many US and European arms companies could not significantly ramp up production capacity because of labour shortages, soaring costs and supply chain disruptions that were exacerbated by the ongoing wars. Relatively smaller suppliers like Germany, Norway, Iran, Turkey, Poland, and North Korea had to step in. Of Course countries like Israel and South Korea are known to maintain high stocks and surge production capacities.

European arms imports nearly doubled, US and French exports rose, and Russian exports fell sharply due own wartime requirements. However, Russian arms production shot up. There was 300 percent increase in artillery shell production.  Around 55 percent of arms imports by European states in the period 2019-23 were supplied by the USA, up from 35 percent in 2014-18. The USA’s arms exports share of total global arms exports rose from 34 percent to 42 percent. France’s arms exports increased by 47 percent between 2014-18 and 2019-23 and for the first time it was the second biggest arms exporter, just ahead of Russia.

Largest share of global arms transfers goes to Asia, with India among the world’s top arms importer. For the first time in 25 years, the USA was the largest arms supplier to Asia and Oceania. The USA accounted for 34 percent of arms imports by states in the region, compared with Russia’s 19 percent and China’s 13 percent. The USA accounted for 69 percent and Germany for 30 percent of arms imports by Israel. Pakistan was the fifth largest arms importer in 2019-23 and China became even more dominant as its main supplier, providing 82 percent of its arms imports.

Interestingly, He said production values surged from the fiscal year 2022-2023 by 16.8 percent to Rs. 1,26,887 crore in FY 2023-2024, and defence exports have reached to the level of `21,083 crore ($2.6 billion) in the financial year 2023-24 which is a spectacular growth of 32.5 percent over the previous fiscal. India’s defence exports target is over ` 50,000 crore by FY29.

India’s Defence Budgeting and Way Ahead

Chinese and Indian troops, the two largest armies by numbers, continue to face eyeball-to-eyeball on the Line of Actual Control (LAC) for nearly four years now. The negotiations are on to ease border tensions. The two sides have held 21 rounds of military talks to resolve outstanding problems, but more ground needs to be covered.

India is the fourth most powerful military force. India is also the fourth largest military spender in 2023. The defence budget for 2024-25 is only an interim one due to ongoing elections. In February 2024, India’s interim budget gave a very marginal 4.72 percent increase over last year’s budget estimates and it amounted to only 0.37 percent increase over revised estimates. The figures may go up when full budget gets presented on 23 July by when this article would have gone to print.

At $83.6 billion, its 2023 military expenditure was just 4.2 percent higher than in 2022. It constituted 13.18 percent of the central government’s expenditure. It was 1.9 percent of GDP. Capital allocations for modernisation and infrastructure development was 27 percent of the total and saw increase by 6.7 percent. Nearly 75 percent of Capital purchases have to Made-in-India. There was 43 percent increase in the capital budget of Border Roads Organisation (BRO) to build up infrastructure along LAC. The DRDO saw an increase of 9 percent for defence research & development.

India needs to spend much more on R&D to have intellectual property of its own. The aero-engine, hypersonic, electronic warfare, directed energy weapons, AI, uncrewed systems, drones, robotics, quantum, long range missiles, cyber, and Space, are some of the major areas. Jump start may not be easy. Partnerships with friendly foreign countries are perhaps the best way. Prime Minister Modi has had one-on-one meetings with CEOs of all top technology companies and has invited them to work in India.

Ongoing conflict have clearly brought out that wars will not be short and swift. Despite being the fourth most powerful nation, the power index gap with China remains very significant. India has a numbers and modernisation backlog. India is short of 11 fighter squadrons, needs much more helicopters, especially attack variants. India needs more submarines, warships, tanks, artillery guns and unmanned systems. Drone inductions and inventories have to go up. India must also take its call on next aircraft carrier. Importance of air defence systems has got underscored. It has to build up munitions stocks. Clearly Indian military has to grow and allocations must increase according to threat perception.