Finance Minister Nirmala Sitharaman unveiled the Interim Budget 2024 on February 1, featuring a historic allocation for the Ministry of Defence. Keeping the current geopolitical scenario and with the twin objective of promoting self-reliance and exports, the budget allotted Rs.6.2 lakh crore, marking an 18.35% increase from the previous year and 13.04% of the total Union Budget. At the same time, the Finance Minister introduced a new initiative aimed at fortifying deep technology within the defence sector.
The detailed breakdown of the allocation includes Rs.1.72 lakh crore for military capital expenditure, Rs.1.4 lakh crore for defence pensions, and Rs.2.8 lakh crore for defence services. The budgetary allocation for the Financial Year 2024-25 is higher by around one lakh crore. Of this, a major share of 27.67% goes to capital, 14.82% to revenue expenditure on sustenance and operational preparedness, 30.68% to Pay and allowances, 22.72% to defence pensions and 4.11% to civil organisations under Ministry of Defence.
Upward Trend Continues in Defence Capital Expenditure
The positive trajectory in Defence Capital Expenditure continues, bolstering the ‘Aatmanirbharta’ initiative. The budgetary provision for capital expenditure in Defence for the fiscal year 2024-25 stands at Rs 1.72 lakh crore, reflecting a substantial increase of 20.33% compared to the actual spending of FY 22-23 and a 9.40% rise from the Revised Allocation of FY 23-24. This allocation aligns with the Long Term Integrated Perspective Plan (LTIPP) of the three Services, aiming to address critical capability gaps through the modernization of the Armed Forces by realizing significant acquisitions in the fiscal year 2024-25. The augmented budgetary allocation will play a crucial role in outfitting the Armed Forces with cutting-edge, specialized technology, including lethal weapons, Fighter Aircraft, Ships, Platforms, Unmanned Aerial Vehicles, Drones, Specialist Vehicles, and more, according to the Defence Ministry statement.
The allocated budget will finance the planned modernisation of the existing Su-30 fleet, additional aircraft procurement, the acquisition of advanced engines for existing MiG-29, transport aircraft C-295, and missile systems. Furthermore, additional funding will support the LCA MK–I IOC/FOC configuration to advance the’ Make in India’ initiative, ensuring cutting-edge technology in domestic production.
This budget will also materialise various Indian Navy projects, including acquiring deck-based fighter aircraft, submarines, and next-generation survey vessels. The substantial capital allocation is strategically focused on promoting ‘Aatmanirbharta’ in Defence. A significant portion of this allocation will be directed towards procurement from domestic sources, facilitating the production of next-generation weapon systems within the country. This approach is expected to have a multiplier effect on the GDP, generate employment, encourage capital formation, and stimulate the domestic economy.
Higher Allocation for Operational Readiness under Revenue Expenditure
The allocation for revenue expenditure (excluding salary) to the Armed Forces, designated for operational sustenance and commitments in the fiscal year 2024-25, stands at Rs 92,088 crore. This amount reflects a notable 48% surge compared to the budgetary allocation of FY 2022-23. During the mid-year review, a remarkable 82% increase over the fiscal budget of FY 22-23 was implemented, surpassing the milestone of Rs one lakh crore for the first time. The objective is to provide optimal maintenance facilities and support systems for all platforms, including aircraft and ships. Additionally, it facilitates the procurement of ammunition, resource mobility, and personnel movement and addresses the day-to-day expenditures of the Armed Forces, reinforcing their deployment in forward areas and ensuring constant preparedness for any unforeseen circumstances. The sustained higher allocation in this category since FY 2023-24 has effectively addressed the forces’ concerns, enhancing their sustenance and operational readiness, as per the MoD statement.
Defence Pension Budget increased to Rs 1.41 lakh crore
Total Budgetary allocation on account of 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 around 32 lakh pensioners through SPARSH and through other pension disbursing authorities.
Unprecedented Allocation to Ex-Servicemen Welfare Scheme
The total allocation to the Ex-Servicemen Welfare Scheme for FY 2024-25 is 28% higher than the allocation for FY 23-24 (From Rs 5,431.56 crore to Rs 6,968 crore). This is in addition to the unprecedented allocation at the revised estimate stage during the current year, where the budgetary allocation to ECHS was enhanced by 70% over BE of 2023-24 and was made to Rs 9,221.50 crore.
Jump in Border Infrastructure Allocation for Strategic Requirements
In light of the continued threat perception faced at the Indo-China border, there continues a jump in the Capital Budget allocation to the Border Roads Organisation. The allocation for BE 2024-25 is Rs 6,500 crore, which is 30% higher than the allocation for FY 23-24 and 160% higher than the allocation for FY 2021-22.
Projects such as development of Nyoma Air field in Ladakh at an altitude of 13,700 feet, permanent bridge connectivity to southernmost Panchayat of India in Andaman and Nicobar island, 4.1 km strategically important Shinku La tunnel in Himachal Pradesh, Nechiphu tunnel in Arunachal Pradesh and many other projects will be funded out of this allocation.
Strengthening the Multi-Mission Service led by Indian Coast Guard
Allocation to the Indian Coast Guard (ICG) for this FY 2024-25 is Rs 7.651.80 crore, which is 6.31% higher than the allocation for FY 2023-24. Of this, Rs 3,500 crore is to be incurred only on capital expenditure, adding teeth to the arsenal of the ICG to address the emerging challenges posed by water and provide humanitarian assistance to other nations. The allocation will facilitate the acquisition of fast-moving patrolling vehicles/interceptors, advanced electronic surveillance systems and weapons.
Marginal Increase in DRDO Allocation
Emphasising the imperative of achieving self-reliance in Defence technology and manufacturing through collaborative innovation and research among all stakeholders, the budgetary allocation for the Defence Research and Development Organisation (DRDO) has witnessed an increase to Rs 23,855 crore in FY 2024-25 from Rs 23,263.89 crore in FY 2023-24. A substantial portion of this allocation, amounting to Rs 13,208 crore, is dedicated to capital expenditure, providing robust financial support to the DRDO for the development of new technologies, with a specific emphasis on fundamental research and fostering collaboration with private entities through the Development-cum-production partner approach.
Rs One Lakh Crore Corpus for Deep Tech For Long-Term Loan To Youth/Companies
Furthermore, the Technology Development Fund (TDF) scheme allocation stands at Rs 60 crore. This scheme is designed to support new start-ups, MSMEs, and academia, encouraging bright young minds interested in innovation and the development of niche technology in the defence domain in partnership with the DRDO. The announcement of a Rs one lakh crore corpus for Deep Tech, earmarked for long-term loans to tech-savvy youth/companies and tax advantages for start-ups, is poised to provide additional momentum to innovation within the defence sector, the Ministry hopes.