India is set to overtake Britain with the third-largest defence budget by 2018, said the report.
India is among the world's top five defence spenders with its military budget at $50.7 billion, overtaking Saudi Arabia and Russia, according to a new report released today.
The US, China and the UK remain the top three defence spenders while India has the fourth largest military budget, followed by Saudi Arabia and Russia, according to the '2016 Jane's Defence Budgets Report', released by research firm HIS Markit.
India spent $50.7 billion this year on defence, up from $46.6 billion last year.
The report said that India is set to overtake Britain with the third-largest defence budget by 2018 as a result of its modernisation drive.
The US remained way ahead of the world with a budget of $622 billion, followed by China at $191.7 billion while the UK spent $53.8 billion on defence this year, Saudi Arabia $48.68 billion and Russia $48.44 billion.
After three years of budgetary constraints, the definitive UK-based defence magazine forecasts that Indian spending will rise from $38 billion in 2010 to $64 billion in 2020.
"Procurement spending has been constrained in India over the last three years as personnel costs have increased. However, what we expect to see from 2017 onwards is a military focused on modernisation. India needs new equipment to fulfil its modernisation drive. Over the next three years, India will re-emerge as a key growth market for defence suppliers," said Craig Caffrey, principal analyst for Asia-Pacific at 'HIS Janes'.
The worldwide outlook shows that global defence spending rose by 1 per cent to $1.6 trillion this year, against 0.6 per cent in 2015.
This rise has been attributed largely to strategic threats posed by Russia and the Islamic State terror group in the Middle East.
"Defence spending returned to a healthy rate of growth in 2016, kicking off what we expect to be a decade of stronger global defence spending," said Fenella McGerty, principal analyst at 'IHS Janes'.
By 2020, China is forecast to be spending more than the whole of western Europe on defence and by 2025, more than all the states in the Asia-Pacific region combined.