Finance minister Nirmala Sitharaman on Tuesday announced a defence allocation of nearly ₹6.22 lakh crore in the Union Budget 2024-25, with a sizeable chunk of the modernisation outlay allocated for buying weapons, systems and equipment from domestic suppliers in line with the NDA government’s ‘Atmanirbhar Bharat’ goal.
The allocation is 4.79% higher than what it was in the budget estimates ( ₹5,93 lakh crore) for financial year 2023-24, but a fraction lower than last year’s revised estimates ( ₹6.23 lakh crore), budget documents show. The allocation is only ₹400 crore more than what it was in the interim budget ( ₹6,21,540.85 crore) that was announced in February, which back then accounted for 13.04% of the total government budget.
This year’s allocation ( ₹6,21,940.85 crore) includes a revenue expenditure of ₹2.82 lakh crore, a capital expenditure of ₹1.72 lakh crore and a pension outlay of ₹1.41 lakh crore. The capital outlay includes ₹1.05 lakh crore for domestic procurement, and the revenue outlay consists of ₹92,088 crore for sustenance and operational readiness.
The defence budget accounts for 12.9% of the total government budget and 1.9% of the country’s projected gross domestic product (GDP) for 2024-25.
Overall, the defence ministry has earmarked 75% of the total modernisation budget for domestic procurement in FY2024-25. “This will have a multiplier effect on the GDP, employment generation and capital formation, thus providing a stimulus to the economy,” the defence ministry said in a statement.
“The allocation is aimed to promote Atmanirbharta (self-reliance) in defence technology and manufacturing and equipping the armed forces with modern weapons/platforms along with creation of job opportunities for the youth,” the ministry said in the statement, soon after Sitharaman presented the budget in Parliament.
To be sure, she did not spell out the defence allocation in her speech.
“While maintaining the allocation made to the defence ministry during the interim budget, the government has made an additional allocation of ₹400 crore on innovation in defence through the ADITI scheme,” the ministry statement said. ADITI stands for Acing Development of Innovative Technologies with iDEX (Innovations for Defence Excellence).
The capital outlay (for modernisation) stood at ₹1.62 lakh crore in 2023-24, with the allocation revised to ₹1.57 lakh crore.
“In absolute terms, the budgetary allocation under capital head to the defence forces for FY 2024-25 is ₹1.72 lakh crore, which is 20.33% higher than the actual expenditure of FY 2022-23 and 9.40% more than the revised allocation of FY 2023-24. The allocation is aimed to fill the critical capability gaps through big ticket acquisitions in current and subsequent FYs,” the statement said. To be sure, the capital budget is 5.8% more than the budget estimates for 2023-24.
The enhanced allocation for 2024-25 will help the armed forces strengthen their capabilities with new military hardware to stay prepared for security challenges.
India is modernising its military with fighter jets, helicopters, warships, tanks, artillery guns, rockets and missiles, unmanned capabilities and other combat systems at a time when it is locked in a military standoff with China in eastern Ladakh.
The standoff has entered its fifth year, with no indication of an immediate resolution to the outstanding problems along the Line of Actual Control (LAC), even as India is hoping that ongoing negotiations with the neighbour will result in restoring the status quo ante of April 2020.
“The enhanced budgetary allocation will fulfill the requirement of annual cash outgo on planned capital acquisitions aimed at equipping the armed forces with state-of-the-art niche technology, lethal weapons, fighter aircraft, ships, submarines, unmanned aerial vehicles, and specialist vehicles,” the statement said.
The revenue expenditure includes almost ₹6,000 crore for the Agnipath scheme, up from ₹4.266 crore and ₹3,518 crore in the budget and revised estimates for 2023-24.
Revised estimates in the budget documents show that the armed forces were unable to spend ₹5,372 crore of last year’s capital outlay of ₹1.62 lakh crore. In 2022-23, the armed forces spent around ₹21,000 crore on top of the previous year’s budget allocation, as border tensions with China saw the country make a raft of emergency purchases and sharpen its focus on building infrastructure in forward areas.
The Border Roads Organisation, which is at the centre of India’s border infrastructure push, has been given a capital outlay of ₹6,500 crore, which is 30% higher than the allocation for FY 2023-24 and 160% higher than that in FY 2021-22.
