Union Budget: India to spend $75 Billion on its Military, The Largest among PM Modi’s Ministries
STORIES, ANALYSES, EXPERT VIEWS
In the regular Union Budget of Financial Year (FY) 2024-25 presented by India’s Minister of Finance Nirmala Sitharaman on July 23, the Ministry of Defence (MoD) has been allocated Rs 6,21,940.85 crore (approx. US$75 billion), the highest allocation among Prime Minister Narendra Modi’s ministries in his third term in government.
While maintaining the allocation made to MoD during the interim budget, the Modi government has made an additional allocation of Rs 400 crore for innovation in defence through the Acing Development of Innovative Technologies with iDEX (ADITI) scheme.
Through this scheme, MoD engages with start-ups/MSMEs and innovators to develop Def-Tech solutions and supply the Indian military with innovative and indigenous technological solutions. A grant of up to 50% of the Product Development Budget, with an enhanced limit (Max) of Rs 25 crore per applicant, will be awarded as per extant iDEX guidelines.
The allocation to MoD for FY 2024-25 is higher by approx. Rs one lakh crore (18.43%) over the allocation for FY 2022-23 and 4.79% more than the FY 2023-24 allocation. Out of this, a share of 27.66% goes to capital, 14.82% to revenue expenditure on sustenance and operational preparedness, 30.66% to Pay and Allowances, 22.70% to Defence Pensions, and 4.17% to civil organizations under MoD. The total allocation comes out as approx. 12.90% of Budgetary Estimate of Union of India.
The allocation is aimed at promoting ‘Aatmanirbharta’ in defence technology and manufacturing, equipping the Armed Forces with modern weapons/platforms, and creating job opportunities for the youth.
Modernisation of the forces at the centre
In absolute terms, budgetary allocation under the capital head to the Defence Forces for FY 2024-25 is Rs 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 aims to fill the critical capability gaps through big-ticket acquisitions in current and subsequent FYs. 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, platforms, unmanned aerial vehicles, drones, specialist vehicles, etc.
Strengthening domestic capacity
MoD has earmarked 75% of the modernisation budget, amounting to Rs 1,05,518.43 crore, for procurement through domestic industries during this FY. This will have a multiplier effect on GDP, employment generation, and capital formation, thus providing a stimulus to the economy.
Enhanced allocation for sustenance & operational readiness
The continued higher allocation for operational readiness boosts the morale of the Armed Forces with the sole motive of keeping them battle-ready at all times. The government has allocated Rs 92,088 crore during the current FY under this heading, which is 48% higher than the budgetary allocation of FY 2022-23.
This aims to provide all platforms with the best maintenance facilities and support systems, including aircraft and ships. It will facilitate the procurement of ammunition, mobility of resources & personnel as demanded by the security situation, and strengthen the deployment in forward areas for any unforeseen situation.
Ensuring better healthcare facilities for veterans
The Government is committed to providing the best healthcare facilities to veterans and their dependents through enhanced allocation to the Ex-Servicemen Contributory Health Scheme (ECHS). In the regular FY 2024-25 budget, Rs 6,968 crore was allotted to ECHS, which is 28% higher than the previous year’s allocation.
This follows the significantly higher allocation at the revised estimate stage during the FY 2023-24 when the allocation to ECHS was enhanced by 70 % over BE.
Bolstering Border Infrastructure for Strategic Requirements
The government is firm on its commitment to improving border infrastructure by allocating more resources to agencies involved in executing strategically significant projects and providing last-mile connectivity in the border areas.
In this endeavor, the budgetary allocation to Border Roads Organisations (BRO) under capital for Budget Estimates (BE) 2024-25 has been made as Rs 6,500 crore, which is 30% higher than the allocation for FY 2023-24, and 160% higher over the allocation of FY 21-22.
This year’s financial provision made during the budget will promote strategic infrastructure development in border areas while boosting socio-economic development in that region.
This allocation will fund projects such as the development of Nyoma Airfield in Ladakh at an altitude of 13,700 feet, permanent bridge connectivity to the southernmost Panchayat of India in the Andaman and Nicobar Islands, the 4.1 km strategically important Shinku La tunnel in Himachal Pradesh, the Nechiphu tunnel in Arunachal Pradesh, and many others.
Enhancing the capability of the Indian Coast Guard
The allocation to the Indian Coast Guard (ICG) for FY 2024-25 is Rs 7,651.80 crore, which is 6.31% higher than the FY 2023-24 allocation.
Of this, Rs 3,500 crore is to be incurred only on capital expenditure, adding teeth to the ICG’s arsenal for addressing the emerging maritime challenges and providing humanitarian assistance to other nations. The allocation will facilitate acquiring fast-moving patrolling vehicles/interceptors, advanced electronic surveillance systems, and weapons.
Self-reliance through research & innovation
The Defence Research and Development Organisation (DRDO) budget increased to Rs 23,855 crore in FY 2024-25 from Rs 23,263.89 crore in FY 2023-24.
This allocation involves a significant share of Rs 13,208 crore for capital expenditure. This will financially strengthen the DRDO in developing new technology with a particular focus on fundamental research and hand-holding of the private parties through Development-cum-production partners.
The allocation to the Technology Development Fund (TDF) scheme stands out to be Rs 60 crore, which is specially designed for new start-ups, MSMEs, and academia, attracting bright young minds interested in innovation and developing niche technology in collaboration with DRDO.
The Government has increased the allocation on innovation in defence through iDEX from Rs 115 crore during FY 2023-24 to Rs 518 crore in the current fiscal year, which will boost start-ups/MSMEs/innovators in developing Def-Tech solutions and invite young ignited minds.
Defence Pension Budget increased to Rs 1.41 lakh crore
The total budgetary allocation for defence pensions is Rs 1,41,205 crore, which is 2.17% higher than the allocation made during 2023-24. It will be incurred on monthly pension to approx. 32 lakh pensioners through the System for Pension Administration (Raksha) or SPARSH and through other pension disbursing authorities.
India’s Minister of Defence Rajnath Singh termed the full-year Budget for FY 2024-25 as excellent and outstanding, which will help move towards a prosperous and self-reliant ‘Viksit Bharat.’
In a post on X, he stated that the budget will accelerate the country’s economic transformation inspired by Prime Minister Narendra Modi’s vision of inclusive and fast-paced development. He added that it will go a long way in making India a US$5 trillion economy by 2027.
Regarding the MoD allocation, Rajnath Singh exuded confidence that the capital outlay of Rs 1,72,000 crore would further strengthen the Armed Forces’ capabilities. He also hoped that earmarking Rs 1,05,518.43 crore for domestic capital procurement would provide further impetus to the ‘Aatmanibharta’ in defence.
(Courtesy: Defence.Capital)
