Global military expenditure rose for the 11th consecutive year to a record $2.887 trillion in 2025, according to a recent Stockholm International Peace Research Institute (SIPRI) report, marking a 41% increase since 2016.This rise in global military expenditure occurred despite a decline in US defence outlays. Nevertheless, Washington remained by far the world’s largest military spender, with its 2025 defence budget exceeding the combined military expenditure of the next four heavy spenders, China, Russia, Germany and India.The reduction in US outlays was more than offset by rising defence budgets elsewhere, particularly in Asia and Europe, resulting in military expenditure among all countries excluding the US growing by 9.2% over the year.Share of the world’s defence expenditure in GDP risesAlongside, the world’s military burden, or share of the world’s defence expenditure in GDP crept up from 2.4% in 2024 to 2.5% in 2025. The global military expenditure is unlikely to decline anytime soon. If anything, it is expected to continue rising as the US presses its allies and partners to shoulder a greater share of collective defence responsibilities within security arrangements such as NATO.Speaking at the Shangri-La Dialogue in Singapore last month, US secretary of defence Pete Hegseth said that president Donald Trump had set the “gold standard” in defence spending by allocating more than 3.5% of Gross Domestic Product (GDP) to the military and urged “every single ally and partner” to demonstrate a similar level of commitment. He also warned allies accustomed to “free [riding] on the generosity of the American taxpayer”, that such an approach was no longer sustainable.Illustration: Pariplab Chakraborty.NATO allies, long accustomed to the United States’ predominance in Europe’s security architecture, appear to be taking this strategic shift seriously. Earlier this month, UK defence secretary John Healey resigned after concluding that the Labour Party-led government’s long-delayed Defence Investment Plan fell significantly short of the resources required to meet Britain’s defence needs and its longer-term NATO spending commitments. Healey argued that a substantial increase in military expenditure was necessary to address an increasingly volatile security environment, though he did not specify what level of spending would be sufficient.The principal driver of the global increase in military expenditure in 2025 was Europe, where spending rose by 14% to $864 billion, of which $559 billion was accounted for by 29 European NATO members.“In 2025, military spending by European NATO members rose faster than at any time since 1953, reflecting the ongoing pursuit of European self-reliance alongside increasing pressure from the United States to strengthen burden-sharing within the alliance,” said Jade Guiberteau Ricard, Researcher with SIPRI’s Military Expenditure and Arms Production Programme.The pressure to increase defence outlays is being felt across the globe.Japan, which had kept military expenditure at or below 1% of GDP since the 1960s, considering its past role in WW2, increased it by 9.7% to $62.2 billion in 2025, equivalent to 1.4% of GDP, its highest share since 1958. Closer home, Pakistan raised its defence allocation for 2026-27 by 18% while simultaneously restricting development expenditure and pursuing ambitious tax targets to remain compliant with its International Monetary Fund (IMF) programme.This increasingly resembles a new global arms race, albeit one that is far broader than the bipolar military competition of the Cold War era. Instead of two rival blocs – the US and the Soviet Union – multiple states across regions now face mounting pressure to enhance military capabilities to guard their strategic autonomy. One consequence of this state of affairs is the steady rise in global per-capita military expenditure, which reached $352 in 2025 from $228 in 2015.Countries possessing advanced military technologies, mature defence-industrial bases and control over critical minerals and rare-earth supply chains are likely to be the principal beneficiaries of this surge in defence spending. Hegseth declared at the Shangri-La Dialogue that Washington would “prioritise working with model allies” and move them “to the front of the line” for expedited arms sales, industrial collaboration and intelligence sharing.For countries that remain heavily dependent on foreign military technology and equipment, higher defence budgets could, therefore, translate into greater strategic dependence on external suppliers.India remains an exceptionAmid this global rush towards higher military expenditure, India has so far largely bucked the trend. According to official figures, defence spending has generally remained around 2% of GDP since 2014. SIPRI’s methodology produces slightly higher estimates, placing India’s military expenditure between 2.3% and 2.8% of GDP over this period, including 2.3% in 2025.Irrespective of whether India is making a virtue of necessity or consciously exercising fiscal restraint, successive governments have resisted calls from sections of the strategic community to hike defence expenditure to 3% of GDP. The Ministry of Defence (MoD)’s position has remained broadly unchanged since 2009, when it informed parliament’s standing committee on defence that correlating military expenditure with GDP was merely ‘an indexation’ and had little bearing on actual defence preparedness.How long India can maintain this position remains uncertain. Advocates of higher military spending point to the disparity between India’s 2025 defence expenditure of $92.1 billion and China’s $336 billion, an almost four-fold difference. The comparison remains valid, but defence budgets alone are an imperfect measure of military effectiveness.After all, China’s military expenditure was around one-third that of the United States in 2025, yet Beijing remains a formidable strategic competitor. Likewise, Pakistan’s military expenditure was barely one-eighth of India’s, but this has not prevented its security establishment from sustaining a confrontational posture towards New Delhi that resulted in four-days of military hostilities in May 2025. The wars in Ukraine and West Asia too have similarly demonstrated that military success depends not merely on financial outlays, but also on strategy, technology harnessing, industrial capacity, leadership, geography and above all, national resolve.The argument that higher defence expenditure automatically generates economic and strategic returns is only partially valid, as well-directed investment in almost any sector of the economy can yield substantial benefits. This is not to diminish the importance of military spending, but rather to emphasise that defence allocations must be guided by carefully assessed requirements, realistic planning and fiscal affordability.In India’s case, defence planning has generally been disjointed, financially unrealistic and insufficiently linked to measurable capability outcomes. Defence outlays account for the largest single allocation to any ministry in the Union Budget, its share of total Union government expenditure hovering at around 12-13% since 2014-15. Any substantial increase in this allocation, particularly in the absence of comprehensive and outcome-oriented plans for military modernisation, therefore, warrants careful scrutiny.The Union government’s revenues are derived principally from taxation, borrowing and miscellaneous sources like disinvestment, but each of these factors faces significant political, economic and practical constraints. Tax increases are unpopular, excessive borrowing risks fiscal instability and non-tax revenues are limited and unpredictable. Consequently, higher expenditure in one sector inevitably comes at the expense of another.A former US president’s warningTherefore, for any finance minister, balancing competing demands between defence, infrastructure, healthcare, education and welfare is an exercise in difficult trade-offs rather than simple arithmetic.More than seven decades ago, US President Dwight D. Eisenhower had captured this dilemma with remarkable clarity. Addressing the American Society of Newspaper Editors in Washington in 1953, he had observed that “every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed.” He further warned that a world enmeshed in an arms race was expending not merely money, but “the sweat of its labourers, the genius of its scientists, the hopes of its children”.Few policymakers heeded that warning then, and even fewer appear inclined to do so today, as military expenditure surges exponentially across the globe. Yet India, whether by deliberate choice or fiscal necessity, has thus remained an outlier in a world moving towards substantially higher military expenditure, and so far, resisted joining this frenetic arms race. How long it can – and will – continue to do so remains an open question.Amit Cowshish is a former financial advisor (acquisitions), Ministry of Defence.This piece was first published on The India Cable – a premium newsletter from The Wire – and has been updated and republished here. To subscribe to The India Cable, click here.