PTI New Delhi

India should consider benchmarking military spending at 3% of GDP, creating a non-lapsable defence modernisation fund, besides incentivising domestic manufacturing, an EY report said on Monday.

The June edition of EY Economy Watch highlighted the need for a forward-looking defence budgeting strategy, saying this would build a more resilient and responsive defence infrastructure, and make India better equipped to address evolving geopolitical and technological challenges. 

"Over the years, India's military expenditure as a share of GDP has gradually declined - from close to 3% in the early 2000s to just over 2% today, whereas countries like the US and Russia continue to allocate significantly higher proportions," it said.

The EY report recommended "benchmarking defence allocations at 3% of GDP, supplemented by the creation of a non-lapsable defence modernisation fund, and incentivising domestic manufacturing to unlock long-term economic growth multipliers". Going forward, there is a need to enhance the capital component of the defence budget, streamline procurement processes, and emphasise defence-related R&D.

EY India Chief Policy Advisor, D K Srivastava, said, "Benchmarking defence spending at 3% of GDP and operationalising a dedicated non-lapsable modernisation fund can provide the fiscal predictability required for investing in advanced technology, strengthening domestic defence manufacturing ecosystems, and driving innovation-led procurement."