India Allocates 13 per cent to Defence

India Allocates 13 per cent to Defence

Wed, 02/01/2023 - 18:47
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Defence gets Rs 5.94 lakh crore in Budget 2023-24, a jump of 13per cent over previous year

Operational allocation of the Armed Forces gets unprecedented jump

Capital outlay pertaining to modernisation and infrastructure development increased to Rs 1.62 lakh crore; 57per cent rise since 2019-20

Capital Budget of BRO enhanced by 43per cent to Rs 5,000 crore; At Rs 23,264 crore, allocation to DRDO increased by 9per cent

iDEX gets Rs 116 crore, an enhancement of 93per cent over 2022-23, to further foster innovation

India, on Wednesday, allocated 13 per cent of its national budget towards defence expenses. The allocations for border infrastructure and innovation fund received 43 and 93 per cent jump respectively. India has also earmarked one third of its revenue expenditure for operational expenses which is almost 44 per cent higher than the last financial year.

Highlighting the major allocations, Defence Minister Rajnath Singh, in tweets, said, “The Union Budget for the Financial Year 2023-24 envisages a total outlay of Rs. 45,03,097 Crore. Of this, Ministry of Defence has been allocated a total Budget of Rs 5,93,537.64 Crore, which is 13.18 per cent of the total Budget.”

Speaking further, he added, “operational allocation gets a boost of Rs 27,570 Crore, with the budgetary outlay under this segment augmented from Rs 62,431 Crore (current financial year) to Rs 90,000 crore in (budget) 2023-24.

This expenditure is expected to close critical gaps in the combat capabilities and equip the Forces in terms of ammunition, sustenance of weapons and assets, military reserves etc. This will cater to sustenance of Weapon Systems, Platforms including Ships/Aircrafts and their logistics; boost fleet serviceability; emergency procurement of critical ammunition and spares; procuring/hiring of niche capabilities to mitigate capability gaps wherever required; progress stocking of military reserves, strengthening forward defences, amongst others.

The Union Budget for Financial Year 2023-24 envisages a total outlay of Rs 45,03,097 crore. Of this, Ministry of Defence has been allocated a total Budget of Rs 5,93,537.64 crore, which is 13.18 per cent of the total budget. This includes an amount of Rs 1,38,205 crore for Defence Pensions. The total Defence Budget represents an enhancement of Rs 68,371.49 crore (13per cent) over the Budget of 2022-23.

As a precursor to this increase in the Non-Salary Revenue segment, the government during the Mid-term review had also enhanced the operational allotments of the current financial year by Rs 26,000 crore, which works out as 42 per cent of the present allocation. This unprecedented increase in the Revised Estimates 2022-23 has ensured liquidation of the entire carry over liabilities during the current year thereby ensuring that there is no dent in the next year’s operational outlay of the Services. 

The enhanced allocations in the Budget will also cater to Training Aids and Simulators for Agniveers and ensure that they achieve the set standards of training for induction in the Defence Forces.

 Thrust on Modernisation

Accordingly, the Capital Allocations pertaining to modernisation and infrastructure development of the Defence Services has been increased to Rs 1,62,600 crore representing a rise of Rs 10,230 crore (6.7per cent) over FY 2022-23. Also, the increase in the Capital Budget since 2019-20 has been Rs 59,200 crore (57per cent). This increase is a reflection of the Government’s commitment towards sustainable augmentation in the area of modernisation and infrastructure development of the Defence Services.

Border Infrastructure

Accordingly, the Capital Budget of Border Roads Organisation (BRO) has been increased by 43 per cent to Rs 5,000 crore in FY 2023-24 as against Rs 3,500 crore in FY 2022-23. Also, the allocation under this segment has doubled in two years since FY 2021-22. This will boost the Border infrastructure thereby creating strategically important assets like Sela Tunnel, Nechipu Tunnel and Sela-Chhabrela Tunnel and will also enhance border connectivity.

“MoD is committed towards infrastructure strengthening in the Border Areas, particularly the Northern Borders,” the minister added.


India’s Mission of Aatmanirbharta

Towards strengthening Research and Development in Defence, the allocation to DRDO has been enhanced by 9per cent, with a total allocation of Rs 23,264 crore in BE 2023-24.

To further foster innovation, encourage technology development and strengthen the Defence Industrial ecosystem in the country, iDEX and DTIS have been allocated Rs 116 crore and Rs 45 crore respectively representing an enhancement of 93per cent for iDEX and 95per cent for DTIS over 2022-23. This will fulfill the Ministry of Defence’s vision to leverage ideas from bright young minds across the country.

The Union Budget 2023-24 has announced a National Data Governance Policy to unleash innovation and research by start-ups and academia. This will enable access to anonymized data which will further boost the Defence Start-ups and iDEX scheme.

The Union Budget 2023-24 has also announced that the revamped Credit Guarantee scheme for MSMEs which will take effect from 1st April 2023 through infusion of Rs. 9,000 Crore in the corpus. This will enable additional collateral-free guaranteed credit of Rs 2 lakh crore. Further, the cost of the credit has also been reduced by about 1 per cent. This scheme will give a further fillip the MSMEs associated with the Defence Sector.

Expert Reaction

Defence budget increased by 13% to INR 5.94 lakh crore. Capex for defence gets a nominal increase of 7% vs 33% increase in the nation’s overall capital expenditure commitment. We believe -capex allocation misses a commensurate reflection of the govt’s impetus on defence manufacturing, Gaurav Mehndiratta, Partner and Head, Aerospace and Defence, KPMG in India.