819: STRATEGIC COST OF INCREMENTAL MILITARY MODERNISATION

 

Article published in the June 26 edition of the “Life of Soldier” Journal.

 

 

 

India stands at a strategic crossroads. The security environment around the country is becoming more volatile and technologically complex. China has transformed itself into a technologically advanced military power with integrated command structures, space capabilities, cyber warfare assets, and a rapidly expanding naval presence in the Indian Ocean. Pakistan continues to rely on asymmetric warfare while modernising selective military capabilities with external assistance. Beyond conventional threats, the future battlefield is increasingly shaped by artificial intelligence, autonomous systems, electronic warfare, drones, cyber-attacks, and information operations.

India’s approach to defence modernisation has been phased. Each of the previous wars (1962, 1965, 1971, and the Kargil war) has triggered reactive reforms and acquisitions. In future wars, India may not have time to correct deficiencies once the conflict begins. The prevailing environment necessitates military modernisation. Delay can result in strategic vulnerability. The real question is whether India can continue with incrementalism. The danger is the widening gap between the speed of emerging threats and the pace of Indian military adaptation.

 

Threats and Challenges

Warfare is shifting towards integrated domains. India will face a multidimensional threat landscape in future.  China’s military is undergoing a most consequential transformation over the last few decades. It is not simply acquiring more equipment, but fundamentally restructuring its doctrine, organisation, and technological base to fight and win multi-domain, network-centric conflicts at speed. Over the past few decades, Beijing has invested systematically in long-term capability building. It has reorganised command structures, accelerated indigenous defence production, invested heavily in modern technology, and created military civil fusion mechanisms.  The People’s Liberation Army is no longer merely a manpower heavy force. It is evolving into a networked military capable of coordinated operations across all domains. Besides the China challenge, India faces persistent tensions with Pakistan and growing maritime competition in the Indian Ocean Region.

For India, the challenge is further compounded by its geography and terrain. The country must prepare for high-altitude warfare in the Himalayas and maritime security in the Indian Ocean.  It also has to deal with the urban counterterrorism within its borders. Future conflict scenarios may involve simultaneous pressure along land borders, cyberattacks on critical infrastructure, disinformation campaigns, and economic coercion.

 

Slow Procurement Cycles

Incremental Military Modernisation. Incremental modernisation generally focuses on replacing legacy systems rather than redesigning military capability for future warfare. Buying a few squadrons of aircraft or upgrading selected artillery units cannot substitute for integrated transformation.  Incrementalism is not inherently wrong when resources are constrained, and industrial maturity is modest. However, it ceases to be prudent when it becomes a permanent default setting that systematically defers the harder choices. India must therefore recognise that procurement reform is not merely an administrative issue. It is a strategic imperative.

Indian Procurement System. One of the most persistent problems in India’s defence preparedness has been the prolonged procurement cycle. India’s procurement system has emerged from legitimate concerns over transparency, accountability, and financial scrutiny. Defence acquisition in India moves through the tedious process of approvals, technical evaluations, trials, negotiations, financial clearances, and bureaucratic reviews. It takes years or sometimes even decades. Fear of allegations, audit pressures, and political controversy has often discouraged timely decision-making. Bureaucratic caution has become embedded within the acquisition culture.

Strategic Consequences. Slow procurement cycles have strategic consequences: –

    •  Deterrence Weakening. Adversaries assess not only a nation’s current capabilities but also the speed at which it can adapt and replenish its military power. A country perceived as institutionally slow may invite coercive pressure.
    •  Cost Escalation. Deferred decisions result in increased costs due to Inflation and the need for technological upgrades. The evolving operational requirements further raise the acquisition costs over time. Resorting to emergency purchases is expensive.
    • Doctrinal Gaps. As long as procurement and force‑structure decisions move slowly, doctrinal thinking tends to lag behind technology. New concepts such as multi‑domain operations, joint convergence, and effects‑based targeting remain aspirational rather than institutionalised.
    • Loss of Confidence. Acquisition delays undermine confidence in indigenous systems. Services become reluctant to rely on them due to repeated delays. This creates a situation in which imports remain attractive and appear more capable and reliable.

 

Non-negotiable Imperatives.

Speedy Decision-Making as a Strategic Capability. Modern warfare rewards nations that can make decisions quickly under uncertainty. Strategic agility has become as important as military strength itself. Decision-making speed has a major impact on national security. It has a direct bearing on how quickly and efficiently threats are identified, forces mobilised, technologies integrated, and crises managed. India’s democratic process involves consultation, institutional checks, and political consensus-building. The challenge lies in ensuring that these processes do not become obstacles to strategic responsiveness. The issue is not merely about making faster purchases. It is about cultivating a strategic culture that is proactive, anticipates future challenges, and accepts calculated risk.

Indigenous Capability and Strategic Autonomy. The key to strategic autonomy is the building of indigenous capability. A country that depends on imports for critical defence systems is vulnerable in conflict. Relying on imports of parts, ammunition, sensors, or systems limits flexibility in a crisis. Recent global events have demonstrated that supply chains can be easily disrupted by geopolitical tensions, sanctions, or competing national priorities.

Self-reliance Challenge. The self-reliance challenge is very much both institutional and technological.  Institutionally, indigenous capability requires continuity of investment, realistic timelines, collaborative development, and stable operational requirements. The armed forces prioritise capability enhancement as they cannot compromise on operational readiness.  On the other hand, the industry requires sustained orders and predictable policy frameworks to build a long-term production plan. The challenge is to balance these imperatives.

Phased Capability Development. Abandoning indigenous development in favour of imports perpetuates dependence. At the same time, the minimum deterrence value cannot be compromised. The solution lies in phased capability development. Imports may be necessary in selected areas to fill in the urgent gaps. However, every foreign acquisition should strengthen domestic ecosystems through technology partnerships, local manufacturing, research collaboration, and supply chain development.

 

Recommendations.

Several priorities stand out: –

    • Speed needs to be embedded into the DNA of decision‑making. The approach of “risk‑avoidance‑through‑inaction” should be replaced by the culture of “action‑with‑risk”. National security decision-making requires deeper integration of technological expertise, geopolitical analysis, and long-term planning.
    • Procurement process must be re‑engineered for continuous capability enhancement flow rather than episodic projects. Instead of treating each acquisition as a discrete event, India should move toward a “production‑readiness” model, in which the industrial ecosystem is treated as a continuous provider of enhancements and variants.
    • Procurement systems must become faster, more transparent, and technologically adaptive. Acquisition processes should support iterative upgrades and modular capability development.
    • A more coherent indigenous‑capability strategy must be crafted. Accepting that not every system can be built domestically, prioritising critical technologies that underpin strategic autonomy, and investing heavily in test, evaluation, and certification infrastructure so that indigenous systems mature faster. It also means accepting that some indigenous platforms will initially under‑perform and planning for iterative upgrades rather than expecting a single “game‑changer” project to solve the problem.
    • Defence industrial policy must prioritise the creation of an effective ecosystem. Private industry, start-ups, academic institutions, and public-sector organisations must operate within integrated innovation frameworks.
    • Modernisation should be aligned with the actual threat environment. Military planning should focus on jointness and cross-domain integration.
    • India must invest consistently in emerging technologies. The countries that innovate faster, adapt quicker, and integrate technology more effectively will dominate future warfare.
    • Strategic ambitions require support from the budgetary allocations. Fiscal constraints will always exist. They need to be offset by smart spending, through prioritisation, indigenisation dividends, and public-private partnership models. Roll-over of multi-year funding commitments reduces uncertainty and enables production planning.

 

Concluding Thoughts

The cost of the military modernisation delay can’t be calculated solely from the percentage of ‘legacy’ equipment. It is characterised by a reduction in deterrence value, strategic options, operational readiness, and technological opportunities. Incremental modernisation may be viable in more sedate and favourable strategic conditions. It is unfeasible in the rapidly changing geopolitical environment and the speedy development of military technologies.

India cannot afford strategic complacency. The challenge before India is to modernise faster while building indigenous capabilities. India has the intellectual talent, industrial potential, and operational experience to achieve it. The question is not whether India can afford incremental modernisation, but whether it can afford the consequences of allowing strategic delays.

 

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References and credits

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Disclaimer:

Information and data included in the blog are for educational & non-commercial purposes only and have been carefully adapted, excerpted, or edited from reliable and accurate sources. All copyrighted material belongs to the respective owners and is provided only for wider dissemination.

 

 

References

Bajwa, P. S., “India’s defence procurement: Challenges and the way forward”. United Service Institution of India. 2023.

Bitzinger, R. A. (2021). “Modernising China’s military: Problems, progress, and prospects”. RAND Corporation.

Cohen, S. P., & Dasgupta, S. (2010). “Arming without aiming: India’s military modernisation”. Brookings Institution Press.

Dahiya, R., & Behuria, A. K. (Eds.). (2012). “India’s neighbourhood: Challenges in the next two decades”. Institute for Defence Studies and Analyses.

Government of India, Ministry of Defence. (2023). “Defence acquisition procedure 2020 (amended)”. Department of Military Affairs.

Gupta, A. (2019). “Building an arsenal: The evolution of regional power force structures”. Praeger.

Kapila, S. (2021). India’s defence modernisation: Structural constraints and strategic imperatives. Journal of Defence Studies.

Khosla, A. (2024, November). “India’s aerospace modernisation: Challenges and imperatives”. Air Marshal’s Perspective. https://55nda.com/blogs/anil-khosla

Ladwig, W. C. (2020). “Indian military modernisation and conventional deterrence in South Asia”. Journal of Strategic Studies.

Sawhney, P., & Wahab, G. (2014). “Dragon on our doorstep: Managing China through military power”. Aleph Book Company.

Tatsumi, Y., & Weston, J. (2019). “Conventional deterrence in the second nuclear age”. Stimson Center.

785: HIGHLIGHTS & ANALYSIS: DEFENCE BUDGET 2026–27

 

Finance Minister Nirmala Sitharaman presented the Indian Defence Budget for the Financial Year 2026 on 27  February 1, 2026.

 

 

Overall Defence Allocation: A Record Increase

India’s defence spending for FY 2026–27 has been set at approximately ₹7.85 lakh crore, marking a roughly 15% increase over the previous year’s allocation (FY 2025–26: ₹6.81 lakh crore).

Defence remains one of the top-funded ministries in the budget, reflecting strategic priority. This is one of the largest-ever defence outlays in absolute terms.

Defence spending is now close to 1.99%–2.0% of India’s projected GDP, reversing the recent downtrend in the defence-to-GDP ratio.

Maintaining near-2% of GDP aligns India with many major powers and signals sustained political backing for defence preparedness.

 

 

Strategic Drivers Behind the Budget

The Budget is the first after Operation Sindoor.

Rising tensions with China and Pakistan, and an evolving security environment, have pressured India to enhance deterrence and capability.

 

Capital vs Revenue Expenditure: Modernisation Takes Priority

Capital allotment is ₹2.19 lakh crore, up around 22%.

Supports next-gen fighter jets, drones, submarines, and emergency arms post-Operation Sindoor.

Central allocations within this include ₹63,733 crore for aircraft & aero engines and ₹25,023 crore for strengthening the naval fleet.

Also, ₹0.29 lakh crore for DRDO (up from ₹0.27 lakh crore) and ₹0.07 lakh crore for Border Roads Organisation (BRO).

Emergency Procurements: Significant funds are earmarked to replenish stockpiles (ammunition, spares, and fuel) depleted during Operation Sindoor.

This shows a strong push to modernise armed forces, including fighter jets, aeroengines, naval platforms, and unmanned systems, all of which are vital to addressing future capability gaps.

 

 

Revenue Expenditure (Operations & Pensions)

Revenue expenditure (payroll, maintenance, operations) remains the bulk of the budget, including ₹1.71 lakh crore for pensions and other recurring costs.

Revenue Expenditure: 3.6546, 57% (20.17% for sustenance/ops + 26.40% for pay/allowances) ₹1.58 lakh crore for operations, maintenance, stores, and spares. Up 17.24% from FY 2025-26 BE, emphasising operational readiness.

Pensions: 1.712, 84% for over 34 lakh pensioners via SPARSH system. Up 6.56% from FY 2025-26 BE. Other (Civil Organisations, ECHS, etc.) 0.29 (approx.)3.64%Includes ₹0.12 lakh crore for Ex-Servicemen Contributory Health Scheme (ECHS), up 45.49% from FY 2025-26 BE and over 300% from FY 2021-22.

Agnipath Scheme: Allocation for the scheme surged by 51% (to ₹15,173 crore), signalling the maturing of the new HR model for the armed forces.

 

 

Boost to Self-Reliance (Atmanirbhar Bharat)

This budget reflects a strategic shift towards self-reliance (Aatmanirbhar Bharat), with 75% of capital acquisitions earmarked for domestic industries, including private sector involvement.

It also includes provisions for emergency procurements post-Operation Sindoor, enhanced R&D, and the development of border infrastructure.

Customs Duty Exemptions: Basic Customs Duty (BCD) is waived on raw materials and components imported for the manufacture and maintenance of aircraft parts, as well as for Maintenance, Repair, and Overhaul (MRO).

Impact: This is designed to lower input costs for Defence PSUs and private players, thereby turning India into a regional hub for aircraft maintenance.

The defence budget-linked allocation supports indigenous manufacturing and R&D.

DRDO & iDEX: The R&D budget increase supports next-gen tech like swarm drones, AI-enabled electronic warfare (EW), and hypersonic missiles.

The budget reinforces India’s technology and production push in semiconductors, deep-tech systems, and defence industrial corridors.

This dovetails with broader reform goals,  reducing import dependence while strengthening domestic defence firms.

 

Border Infrastructure (BRO)

Reflecting the tense multi-front reality (China, Pakistan, and Bangladesh), the Border Roads Organisation (BRO) saw its capital budget hiked to ₹7,394 crore. This will accelerate “last-mile connectivity” projects like the Shinku La tunnel and strategic airfields in Ladakh and Arunachal Pradesh.

 

Intelligence and Internal Security Buildup

The Intelligence Bureau (IB) received a 63% increase in funding, one of the most significant boosts for internal security.

This reflects recognition that modern defence is not just about external threats but also about internal threat management, cyber, intelligence, counter-terrorism, and hybrid warfare.

 

 

Analysis and Implications

The budget effectively balances immediate tactical needs (post-Op Sindoor replenishment) with long-term structural shifts (domestic MRO and 75% indigenous procurement).

This budget signals a proactive stance on national security, with the sharpest hikes in capital (21.84%) and revenue (17.24%) outpacing pensions (6.56%), indicating a pivot from legacy costs to future capabilities.

The emphasis on domestic procurement (75% of capital acquisitions) aligns with the Aatmanirbhar Bharat initiative, potentially boosting local industries, job creation, and ancillary sectors like aerospace and electronics.

Post-Operation Sindoor, allocations for emergency arms, drones, and border infrastructure (via BRO) address immediate threats from Pakistan. At the same time, long-term R&D investments (DRDO hike) aim to counter broader challenges from China.

Economically, the 2% GDP share remains below global peers like the US (3.5%) or Russia (4%), but the absolute increase to ~$86 billion positions India as a top (fourth-highest) global spender.

Overall, this allocation enhances India’s deterrence credibility, fosters innovation, and supports regional stability, though sustained execution will be key to realising these goals.

 

Strategic Takeaways

The most significant increase in defence spending in recent years

Focus on modernisation & capital acquisition.

Alignment with security imperatives post-Operation Sindoor

Growth of the domestic defence ecosystem & R&D push.

 

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714: PAKISTAN’S SOARING DEFENCE BUDGET: BULLETS FROM BORROWED MONEY

 

My Article published on the IIRF website on 02 Aug 25.

 

On June 10, 2025, Pakistan’s Finance Minister Muhammad Aurangzeb announced the national budget for the fiscal year 2025-26, revealing a notable 20.4% increase in defence expenditure, the highest in ten years. The budget allocation for the nation’s armed forces increased to 2.55 trillion rupees (equivalent to $9 billion), up from 2.12 trillion rupees in the preceding fiscal year. This increment constitutes 1.97% of Pakistan’s gross domestic product (GDP), compared to 1.7% in the previous year. The rise in defence spending prompts inquiries regarding its funding sources, economic trade-offs, and broader implications for Pakistan’s fiscal stability and geopolitical strategy.

 

Funding the Defence Budget Hike

The defence allocation of 2.55 trillion rupees, supplemented by an additional 742 billion rupees (equivalent to $2.63 billion) designated for military pensions, results in a total military expenditure of 3.292 trillion rupees (approximately $11.67 billion). This escalation occurs amidst a context of a 6.9% contraction in the overall federal budget, which decreased from 18.9 trillion rupees to 17.57 trillion rupees (about $62 billion). To accommodate this increase in defence spending, Pakistan is employing a combination of tax revenue, non-tax revenue, borrowing, and reallocation of resources from other sectors, managing to stay somehow within the framework of fiscal constraints imposed under an International Monetary Fund (IMF) program.

Tax Revenue: The Ordinary Citizen Pays. The principal source of funding for the defence budget is an assertive tax collection target. The 2025-26 budget anticipates total gross revenue of 19.298 trillion rupees, with 14.131 trillion rupees expected from the Federal Board of Revenue (FBR). This signifies a 19% increase from the revised 12.33 trillion rupees collected in the preceding fiscal year. The government aims to achieve a tax-to-GDP ratio of 11.4%, up from 9.5%, by expanding the tax base and improving compliance. Essential measures encompass taxing agricultural incomes, augmenting levies on salaried individuals, and imposing higher taxes on retailers and exporters. Nevertheless, Pakistan’s sluggish economic growth, estimated at 3.5% for 2025-26, casts doubt on the achievability of this target.

Non-Tax Revenue: State–owned and Private Enterprises Contribute.  Non-tax revenue, projected at 5.167 trillion rupees, constitutes a significant component of fiscal income. This includes proceeds from privatisation (87 billion rupees), dividends from state-owned enterprises, and various other sources, such as regulatory fees. Although these funds do not directly target defence expenditures, they augment the overall revenue pool, thereby enhancing the government’s capacity to allocate additional resources to the military. Nonetheless, privatisation initiatives have historically yielded limited results, and dependence on non-tax revenue remains a precarious strategy amid Pakistan’s economic volatility.

Borrowing for Bullets. The budget projects a fiscal deficit of 6.5 trillion rupees (approximately $23 billion), representing 3.9% of Gross Domestic Product (GDP), a decrease from 5.9% in the preceding year. This deficit will be financed through both domestic and external borrowing, including commercial loans and multilateral assistance. Domestic borrowing, primarily via government bonds, is anticipated to cover a substantial portion. Concurrently, external loans from entities such as the International Monetary Fund (IMF) and friendly nations, including China and Saudi Arabia, will also contribute. The escalation in defence expenditure, coupled with a 24% increase in debt servicing costs amounting to 8.8 trillion rupees, highlights Pakistan’s significant dependence on borrowing. Such an approach poses risks of exacerbating the country’s debt burden, which, according to IMF estimates, already accounts for approximately 90% of the country’s GDP.

Reallocation from Social Sectors: At The Cost of Development. To accommodate the defence hike, the government has significantly reduced expenditures in critical social sectors. The federal budget allocated for health was decreased to 32 billion rupees, and education received a mere 113 billion rupees, reflecting a 7% overall reduction in development expenditure. These reductions have elicited widespread criticism, particularly in rural regions where healthcare and educational infrastructure are already under significant strain. By prioritising defence over development, Pakistan is redirecting resources away from long-term growth drivers, thereby potentially aggravating socio-economic inequalities.

IMF Program and Fiscal Discipline: Spending on Defence but Borrowing for Essentials. Pakistan’s economy operates under an IMF Extended Fund Facility, which imposes strict fiscal targets, including a primary surplus of 1.6% of GDP. While IMF funds are not directly allocated to defence, they stabilise the economy by supporting the balance of payments and stabilising the Pakistani rupee. This stability allows the government to redirect domestic resources to military spending. However, the IMF’s emphasis on fiscal consolidation limits Pakistan’s ability to expand social spending, forcing trade-offs that favour defence. The government’s commitment to meeting IMF conditions, such as reducing subsidies and increasing taxes, further constrains its fiscal flexibility.

 

Implications of the Defence Surge

The significant increase in defence spending has far-reaching implications for Pakistan’s economy, society, and regional standing.

Economic Trade-Offs: Vicious Cycle. The prioritisation of defence over social sectors risks undermining Pakistan’s long-term financial stability. Reduced investment in health and education could exacerbate poverty and illiteracy, which already affect 40% and 43% of the population, respectively, according to World Bank data. The reliance on borrowing to finance the fiscal deficit, including defence spending, increases Pakistan’s debt servicing burden, which now consumes nearly 50% of the budget. This could lead to a vicious cycle of borrowing and repayment, limiting fiscal space for future development. Moreover, the ambitious tax targets may strain businesses and households, potentially stifling economic growth. Higher taxes on salaried workers and retailers could exacerbate inflation, a persistent issue with annual rates of 9-12%. If tax collection falls short, the government may resort to further borrowing or austerity measures, both of which could destabilise the economy.

Geopolitical Context: Regional Arms Race. The increase in the defence budget is a direct response to heightened tensions with India. Pakistan’s military assesses the necessity of strengthening its capabilities to counter India’s superior defence expenditures, projected to reach $80 billion by 2025. Nonetheless, this escalation poses the risk of intensifying an arms race in South Asia, which may further strain Pakistan’s economy and divert resources from essential domestic priorities.

Social and Political Ramifications: Political Instability and Tension. The budget’s focus on defence at the expense of social services has sparked public discontent in Pakistan. Critics argue that neglecting health and education undermines human capital development, critical for Pakistan’s young and growing population. Political opposition parties, including the Pakistan Tehreek-e-Insaf, have capitalised on this, accusing the government of prioritising military interests over public welfare. This could exacerbate political instability, a concern already present in Pakistan’s history of civil-military tensions.

International Relations and IMF Oversight: External Debt Vulnerabilities. The defence hike may complicate Pakistan’s relations with the IMF and other international partners. While the IMF does not directly dictate defence spending, its focus on fiscal discipline could lead to scrutiny of Pakistan’s budgetary priorities. Friendly nations like China, which provide significant loans and investments, may support the defence increase due to their strategic interests in countering India. However, reliance on foreign loans risks deepening Pakistan’s external debt vulnerabilities.

 

Conclusion

Pakistan’s decision to augment defence expenditure by over 20% in the 2025-26 budget reflects its strategic imperatives amid tensions with India. Funded through increased taxes, non-tax revenue, borrowing, and reductions in social sectors, this increase underscores the government’s prioritisation of security over development. While the augmentation may enhance military capabilities, it entails considerable costs to economic stability and public welfare. The dependence on borrowing and ambitious fiscal targets, coupled with curtailed social spending, risks exacerbating poverty, inequality, and fiscal vulnerabilities. As Pakistan navigates these challenges, establishing a balance between defence requirements and economic and social priorities will be essential for ensuring long-term stability in a volatile region.

 

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PAKISTAN’S SOARING DEFENCE BUDGET: BULLETS FROM BORROWED MONEY by Air Mshl Anil Khosla (Retd)

 

 

References and credits

To all the online sites and channels.

Pics Courtesy: Internet

Disclaimer:

Information and data included in the blog are for educational & non-commercial purposes only and have been carefully adapted, excerpted, or edited from reliable and accurate sources. All copyrighted material belongs to respective owners and is provided only for wider dissemination.

 

 

References:-

 1. Aurangzeb, Muhammad. “Federal Budget Speech 2025-26.” Government of Pakistan, Ministry of Finance, June 10, 2025.

2.International Monetary Fund (IMF). “Pakistan: 2023 Article IV Consultation and Request for an Arrangement Under the Extended Fund Facility.” IMF Country Report No. 23/260, July 2023.

3. World Bank. “Pakistan Economic Update: Macroeconomic Challenges and Outlook.” World Bank, October 2024.

4. Government of Pakistan, Ministry of Finance. “Budget in Brief 2025-26.” June 2025.

5. Stockholm International Peace Research Institute (SIPRI). “Military Expenditure Database: India.” SIPRI, 2024.

6. The Express Tribune. “Pakistan’s Defence Budget Jumps 20.4% Amid Tensions with India.” June 11, 2025.

7. Dawn News. “Budget 2025-26: Fiscal Deficit and Borrowing Challenges.” June 12, 2025.

8. Pakistan Bureau of Statistics. “Economic Indicators: Inflation and Exchange Rates.” June 2025.

9. Geo News. “Opposition Slams Budget for Neglecting Social Sectors.” June 15, 2025.

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