In order to reduce imports and promote self-reliance, the defence spending for the 2023-24 Financial Year (FY) was pegged at Rs. 5.93 lakh crore ($72.6 billion), a 13 per cent increase over the last budgetary estimates of Rs. 5.25 lakh crore, aiming to add more weapon systems and roads along China borders.
In the Union Budget presented in Parliament by Finance Minister Nirmala Sitharaman on 1 February, a total of Rs. 1.62 lakh crore, a rise of Rs. 10, 230 crore (6.7%) over the last budget, has been set aside for capital expenditure towards modernisation and infrastructure development. Accordingly, the Capital Budget of the Border Roads Organisation (BRO) has been increased by 43% 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,” the Ministry of Defence (MoD) said in a statement.
The Defence Ministry said the “Non-Salary Revenue outlay” for operational allocation gets a boost of Rs 27,570 crore, from Rs 62,431 crore to Rs 90,000 crore towards maintaining a high level of operational military preparedness.
“This will cater to the sustenance of weapon systems, platforms including warships, aircraft and their logistics, boost fleet serviceability, emergency procurement of critical ammunition and spares, procuring/hiring of niche capabilities to mitigate capability gaps wherever required,” MoD said.
Thrust on Atmanirbharta (Self-Reliance)
Giving a push to the Atmanirbhar Bharat initiative and reducing dependency on imports, this year’s defence budget proposed to enhance the allocation of DRDO by 9%, with a total allocation of Rs 23,264 crore.
“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 93% for iDEX and 95% for DTIS over 2022-23. This will fulfil the Ministry of Defence’s vision to leverage ideas from bright young minds across the country,” Defence Ministry stated.
The Union Budget 2023-24 has also announced that the revamped Credit Guarantee scheme for MSMEs will take effect from 1st April 2023 through the 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 to the MSMEs associated with the defence sector, the MoD added.
Is the Budget meeting the needs of the armed forces?
This year there was no mention of defence in the budget speech delivered by Finance Minister Nirmala Sitharaman. According to the budget documents, an allocation of Rs. 2,70,120 crore has been made for revenue expenditure that includes expenses on payment of salaries and maintenance of establishments. The budgetary allocation of revenue expenditure in the last budget was Rs. 2,39,000 crore. Rs. 1,38,205 crore has been allocated as a separate amount for defence pensions. The total revenue expenditure, including the pension outlay, has been estimated at Rs. 4,22,162 crore. The pension bill has gone up significantly due to the recent revision of the “One Rank One Pension” scheme (OROP), and this has resulted in an additional annual expenditure of approximately Rs 8,450 crore.
The defence budget works out to less than 2% of the projected GDP for 2023-2024 if the huge defence pension allocation of Rs 1.38 lakh crore for around 35 lakh ex-servicemen and defence civilians is considered. This is when military experts have been demanding that India should allocate over 2.5% of the GDP to defence expenditure for building the requisite deterrence against the collusive threat from China and Pakistan. However, in the past few years, India has been ramping up spending to modernise the military while underlining its commitment to boosting domestic production to supply forces deployed along two contentious borders.
Laxman Behera, a defence expert at government-funded Jawaharlal Nehru University in New Delhi, said “The hike in the defence budget was reasonable but not sufficient, considering requirements for military modernisation,” Laxman Behra, defence expert teaching in Jawaharlal Nehru University (JNU) felt India needed more funds in view of growing friction with China along disputed borders.
“The overall increase in the armed forces’ budget is as anticipated, but likely lower than what they asked for to beef up operational capabilities,” said Amit Cowshish, a former financial adviser for acquisitions at the Defence Ministry.
India Inc’s reaction is also on similar lines:“Defence budget increased by 13% to Rs. 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 government’s impetus on defence manufacturing,” said Gaurav Mehndiratta, Partner, and Head of Aerospace and Defence, KPMG in India.