Rs 5.25 lakh crore allocated for defence in Union Budget

For 2021-22, the budgetary allocation for capital outlay was Rs 1,35,060 crore but the revised estimate showed the expenditure at Rs 1,38,850 crore

In tune with the Centre's plan of turning India into a manufacturing hub for the defence sector, Finance Minister Nirmala Sitharaman on Tuesday proposed to set aside 68 per cent of the capital acquisition in the defence sector for domestic industries while opening up a quarter of the defence R&D budget for private companies.

The budgetary allocation of Rs 5.25 lakh crore, however, is only 4.43 per cent more when compared against last year's revised estimate (Rs 5.02 lakh crore) – the money spent on defence - but a 10 per cent hike when seen against the budgetary estimate of Rs 4.78 lakh crore.

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“Our government is committed to reducing imports and promoting Atma Nirbharta (self reliance) in equipment for the armed forces. Sixty-eight per cent of the capital procurement budget will be earmarked for the domestic industry in 2022-23, up from 58 per cent in 2021-22,” Union Finance Minister Nirmala Sitharaman said.

Also, the defence R&D will be opened up for the industry, startups and academia with 25 per cent of the defence R&D budget earmarked.

“Private industry will be encouraged to take up design and development of military platforms and equipment in collaboration with DRDO and other organisations through the SPV model. An independent nodal umbrella body will be set up for meeting wide-ranging testing and certification requirements,” she said.

Amidst the ongoing border tension, the Finance Minister proposed an increase of more than Rs 13,500 crore in capital purchase for the armed forces. Nearly half of it (about Rs 7000 crore) is for the Indian Army.

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The Capital Budget of Border Roads Organisation has been increased by 40 per cent to Rs 3,500 crore in FY 2022-23 vis-à-vis Rs 2,500 crore in FY 2021-22. This will expedite the progress of the creation of border infrastructure including important tunnels (Sela and Naechiphu tunnel) and bridges on major river gaps.

The Navy and Coast Guard witnessed an increase in their budget for new acquisition and infrastructure, whereas IAF's capital budget has been slashed, giving an indication that no new acquisition plans are in the offing.

Overall the defence budget is 13 per cent of the government spending and 2.04 per cent of the GDP.

“The 68 per cent of the defence capital procurement budget has been allocated towards local procurement. It is in line with the ‘Vocal for Local’ push and it will certainly boost the domestic defence industries,” Defence Minister Rajnath Singh tweeted.

The industry has welcomed opening up defence R&D and expanding the scope for the private sector.

“Creation of a Nodal Body for setting up Testing and Certification requirements of defence systems and platforms will help the domestic industry through faster processes and cost-efficiency. Allocation of 25 per cent of Defence R&D budget for Startups, Academia and Private Industry is a much-needed reform,” said S P Shukla, president of the Society for Indian Defence Manufacturers.

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