THE CONTEXT: In June 2025 the North Atlantic Treaty Organization (NATO) resolved to raise total “core defence and security-related outlay” to 5 per cent of members’ Gross Domestic Product by 2035, up from the long-standing 2 per cent guideline. The decision comes in the backdrop of the sharpest annual jump in world military expenditure (9.4 per cent in 2024) since 1988, with global outlay touching US $2.46 trillion.
THE BACKGROUND: Military spending peaked during the early Cold War (about 6 per cent of world GDP in 1960), slid to a trough of 2.1 per cent in 1998, and has climbed back to 2.5 per cent in 2024.
THEORETICAL FRAMEWORK:
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- Guns-versus-Butter dilemma: every rupee channelled to arms has an opportunity cost in social goods.
- Security Dilemma: one State’s deterrence build-up is another’s insecurity, fuelling spirals.
- Military-Industrial Complex: vested interests in sustained procurement; recent lobbying around autonomous weapons exemplifies this dynamic.
CONTEMPORARY GLOBAL TRENDS:
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- Top spenders (2024): United States US$997 bn, China US$314 bn, Russia US$149 bn, Germany US$88.5 bn, India US$86.1 bn.
- NATO bloc already accounts for 55 per cent of world defence outlay (US-led).
- High-GDP ratio spenders outside active war zones are Saudi Arabia 7.3 %, Poland 4.2 %, United States 3.4 %.
KEY DRIVERS
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- Great-power rivalry: US-China competition, Russia-Ukraine war expansion, emergent India-Pakistan and Israel-Iran clashes.
- Alliance commitments: NATO’s new benchmark, AUKUS, Quad naval integration.
- Technological disruption: race for hypersonics, AI-enabled swarms, space defence.
- Defence-industrial lobbying & jobs narrative in post-pandemic economies.
- Perceived US retrenchment pushing European & Asian allies to re-arm.
CONCENTRATION & ALLIANCE POLITICS:
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- NATO’s 32 members together spent US $1.5 trillion in 2024; a rise to 5 per cent of their GDP implies an extra US $900 billion annually by 2035 – bigger than India’s present GDP share on health and education combined.
- Spain has branded the target “unreasonable and counter-productive,” warning of a €40 billion annual hit to welfare.
OPPORTUNITY COSTS AND HUMAN DEVELOPMENT:
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- Crowding-out effect: Cross-country GMM analysis of 116 States finds defence outlay significantly displaces domestic government health spending, with low- and middle-income countries worst hit.
- UN financing gap: UN’s entire annual budget is US $44 billion; only US $6 billion had been received by mid-2025, forcing a planned cut to US $29 billion.
- SDG 1 financing: Ending extreme and absolute poverty by 2030 needs US $70 bn and US $325 bn per year respectively – merely 1 % and 0.6 % of high-income countries’ GNI.
- Climate externalities: Raising NATO spending to 3.5 % alone would add 200 million t CO₂-e
INDIAN SCENARIO AFTER OPERATION SINDOOR
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- Emergency procurement: Government authorised ₹50,000 crore fast-track buys after cross-border strikes under Operation Sindoor in May 2025.
- Budgetary picture: Defence allocation in Union Budget 2025-26 rose to ₹6.81 lakh crore (~US $79 bn), 13 % of total central expenditure, vs public health outlay at 1.84 % of GDP.
- Ayushman Bharat (58 crore beneficiaries) got just ₹7,200 crore in 2024-25 – 0.1 % of the defence bill.
- Fiscal headroom is squeezed further by pensions (one-fourth of the defence budget) and by state-level social-sector liabilities, threatening SDG progress.
THE ISSUES:
| DIMENSION | KEY ISSUES |
|---|---|
| Fiscal Sustainability | Rising debt-to-GDP ratios and FRBM glide paths are jeopardised; interest payments already exceed capital spending in many developing economies. Higher military capital outgo rarely crowds in private investment. Persistent off-budget borrowings for arms can impair sovereign ratings. |
| Human Development Trade-offs | Defence boosts have historically diverted money from preventive health, nutrition and primary education; India’s anaemia prevalence (57 %) and learning poverty signal this misallocation. Political salience of security outstrips silent crises like stunting. Over-militarisation undermines demographic dividend. |
| Climate Commitments | Defence ministries are outside national emission trading schemes; heavy-fuel naval fleets and jet aviation have high carbon intensity. Green budgeting remains voluntary and patchy. Militaries are excluded from most NDC accounting, masking true footprints. |
| Arms Race & Regional Instability | Security dilemma is acute in South Asia; incremental build-ups invite symmetric responses from Pakistan and extra-regional actors. In the Indo-Pacific, AUKUS nuclear subs alter deterrence calculus. Arms races raise probability of inadvertent escalation. |
| Governance & Transparency | Limited parliamentary scrutiny (Standing Committee on Defence seldom debates classified procurements). Cost overruns in major projects (e.g. P-75I submarines) strain exchequer. Absence of open climate audits of defence emissions. |
GLOBAL BEST PRACTICES & ALTERNATIVE PARADIGMS
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- Costa Rica’s Demilitarisation Model: Reallocated 1.5 % of GDP from defence to health and education since 1948, posting HDI at 0.81.
- New Zealand Defence Force Carbon Budget: Mandatory annual disclosure under the Zero Carbon Act.
- Nordic Twin-track: Maintain credible deterrence while ring-fencing welfare budgets through medium-term expenditure frameworks.
- EU “Strategic Compass”: Integrates climate adaptation into defence planning, offering a template for India’s Integrated Capability Development Plan.
THE WAY FORWARD:
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- Codify a Fiscal Rule for Defence Capital Caps: Limit nominal growth of defence revenue expenditure to inflation + 1 pt while protecting capital modernisation through a five-year rolling fund. This aligns security needs with macro-stability.
- Adopt a ‘Human Security Budget’ Lens: Publish an annual Guns-versus-Butter statement quantifying opportunity costs across SDGs; Parliamentary Standing Committee to vet trade-offs transparently.
- Green the Military: Mandate life-cycle carbon costing in capital procurement; electrify non-combat vehicles; invest in SAF (Sustainable Aviation Fuel) pilot plants with DRDO-IOCL collaboration.
- Deepen Quad plus Climate-Security R&D: Leverage joint funds for dual-use green tech (battery storage, small modular reactors for naval propulsion) to offset emissions without sacrificing capability.
- Prioritise Defence Indigenisation with MSME Linkages: Fast-track SPV model that incubates 1,000 tier-3 suppliers, reducing import bill and creating high-skilled jobs.
- Health-Security Dividend Financing: Introduce a 0.1 % Armament Surcharge on high-value defence offsets; hypothecate proceeds to National Public Health Infrastructure Mission.
- Integrate Climate Resilience into Doctrines: Include disaster-relief metrics in readiness reporting; mobilise defence engineers for coastal dyke construction, enhancing soft-power pay-off.
- Strengthen Oversight & Audit: Empower CAG to conduct real-time performance audits of major defence acquisitions and carbon audits, ensuring accountability.
THE CONCLUSION:
A world hurtling towards a five-per-cent defence norm risks exchanging not only treasure but also the planet’s carbon budget and millions of preventable deaths for an illusory sense of security. India’s challenge is to craft a smart-security model that blends credible deterrence with robust human-development investments.
UPSC PAST YEAR QUESTION:
Q. “It is not enough to talk about peace, one must believe in it; and it is not enough to believe in it, one must act upon it.” In the present context, the major weapon industries of the developed nations are adversely influencing continuation of number of wars for their own self-interest, all around the world. What are the ethical considerations of the powerful nations in today’s international arena to stop continuation of ongoing conflicts? 2024
MAINS PRACTICE QUESTION:
Q. The recent decision of NATO to raise its defence spending target to five per cent of GDP has reignited the ‘guns-versus-butter’ debate. In this context, critically examine the implications of rising global military expenditure for human security and climate commitments.
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