- Rs 1.72 lakh crore – 27.67% of total defence budget – allocated for capital acquisition
- Budget to Armed Forces for revenue expenditure (Other than Salary) stands at Rs 92,088 crore
- Budgetary allocation for Defence pensions increased to Rs 1.41 lakh crore
- Rs 6,500 crore earmarked to strengthen border infrastructure
- Rs 7,651.80 crore allocated to Indian Coast Guard
- Budgetary allocation to DRDO enhanced to Rs 23,855 crore
- Rs one lakh crore corpus for Deep Tech for long term loan to youth/companies
New Delhi. 01 February 2024. Year of election and interim budget becomes a cynosure of all eyes more than budgets in non-election years. And this years interim budget has globally attracted eyeballs. In the current geopolitical scenario and with the twin objective of promoting self reliance and exports, the Defence Budget has touched Rs 6,21,540.85 crore in the Financial Year 2024-25. This comes out to be 13.04% of total Union Budget, which was presented by Finance Minister Nirmala Sitharaman in Parliament today.
The Ministry of Defence (MoD) continues to receive the highest allocation among the Ministries. The budgetary allocation to Defence for FY 24-25 is higher by approx. one lakh crore (18.35%) over the allocation for the FY 2022-23 and 4.72% more than allocation of FY 23-24. Of this, a major share of 27.67% goes to capital, 14.82% for revenue expenditure on sustenance and operational preparedness, 30.68% for Pay and allowances, 22.72% for defence pensions and 4.11% for civil organisations under MoD.
Upward trend continues in Defence Capital Expenditure promoting ‘Aatmanirbharta’
Budgetary allocation for capital expenditure in Defence for FY 24-25 is Rs 1.72 lakh crore which is 20.33% higher than the actual expenditure of FY 22-23 and 9.40 % more than the Revised Allocation of FY 23-24. The allocation is in line with the Long Term Integrated Perspective Plan (LTIPP) of the three Services aimed to fill the critical capability gaps through modernisation of the Armed Forces by materialising some big ticket acquisitions in FY 2024-25. The enhanced budgetary allocation will facilitate in equipping the Armed Forces with state-of-the-art, niche technology lethal weapons, Fighter Aircraft, Ships, Platforms, Unmanned Aerial Vehicles, Drones, Specialist Vehicles etc.
Planned modernisation of existing Su-30 fleet along with additional procurement of aircraft, acquisition of advanced engines for existing MiG-29, acquisition of transport aircraft C-295 and missile systems will be funded out of the budget being allocated. Apart from this, to take the initiative of ‘Make in India’ further the LCA MK–I IOC/FOC configuration will be additionally funded to ensure state-of-the-art technology in domestic production. The Indian Navy projects such as acquisition of Deck-based fighter aircraft, Submarines, Next generation survey vessels etc. will all materialise through this allocation. The sizeable allocation under capital is centered around promoting ‘Aatmanirbharta’ in Defence. Large portion of the allocation will be utilised for procurement through domestic sources to provide domestically manufacutured next generation weapon system to the country which will have a multiplier effect on the GDP, create employment, ensure capital formation and provide a stimulus to the domestic economy.
As per the Economic Survey of India report 2023, in the ship-building sector, the investment multiplier is around 1.82, which means that an infusion of approx. Rs 1.5 lakh crore in naval ship-building projects would accrue a circulation of Rs 2.73 lakh crore in the ship building sector due to the multiplier effect.
This year onwards, the Government of India has taken a conscious call to foster jointness among the services by consolidating the demand of the three services into similar items of expenditure such as Land, Aircraft and Aeroengines, Heavy and Medium Vehicles etc. This will bring flexibility in financial management by enabling the MoD to reappropriate the fund among the three services keeping in view the inter services priority. This mechanism will also expedite decision making and ensure better utilisation of the capital budget.
Enhanced higher allocation sustained for operational readiness under Revenue Expenditure
Allocation to the Armed Forces for revenue expenditure (Other than Salary) meant for sustenance and operational commitment for FY 24-25 continues to be high at Rs 92,088 crore, which is 48% higher than the budgetary allocation of FY 2022-23. During the mid-year review, the allocation on this head was increased by 82% over the budgetary allocation of FY 22-23 crossing the figure of Rs one lakh crore for the first time. This is aimed at providing best maintenance facilities and support system to all platforms, including aircraft and ships. It also facilitates procuring of ammunition, mobility of resources, movement of personnel, catering to day-to-day expenditure of Armed Forces in strengthening the deployment in forward areas and keeping the forces always ready to take care of any eventuality. The continued higher allocation since FY 2023-24 in this head has resolved the grievance of the forces and has improved their sustenance & operational readiness.
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 approx. 32 lakh pensioners through SPARSH and through other pension disbursing authorities.
Unprecedented Allocation to Ex-Servicemen Welfare Scheme (ECHS) ensuring better healthcare facilities to Veterans
The total allocation to 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 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. This significantly higher allocation is to take care of Medical Treatment Related Expenditure (MTRE) incurred during the COVID period and to compensate the increase in ECHS rates bringing it at par with the CGHS rates. This is in line with the Government’s resolve to provide best health care facilities to Ex-Servicemen, War veterans, Veer naris and their family members.
Strengthening the need of improving Border Infrastructure for strategic requirements
In the 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 over the allocation of FY 2021-22. This indicates the commitment of the Government to improve border infrastructure. The financial provision made during the budget this year, will, apart from promoting strategic infrastructural development in the border areas, also boost socio-economic development in that region along with promoting tourism. 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 over the allocation of 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 in 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.
Underlining the need of self-Reliance in Defence technology and manufacturing through innovation and research involving all stake-holders
The budgetary allocation to Defence Research and Development Organisation (DRDO) has been increased to Rs 23,855 crore in FY 2024-25 from Rs 23,263.89 crore in FY 2023-24. Of this allocation, a major share of Rs 13,208 crore is allocated for capital expenditure. This will financially strengthen the DRDO in developing new technology with special focus on fundamental research and hand-holding the private parties through Development-cum-production partner. Allocation to Technology Development Fund (TDF) scheme stands out to be Rs 60 crore which is especially designed for new start-ups, MSMEs and academia attracting the young bright minds interested in innovation and developing niche technology in the field of defence in collaboration with the DRDO. The announcement regarding a Rs one lakh crore corpus for Deep Tech for long term loan to tech-savvy youth/companies and the tax advantage to the start-ups will give further impetus to innovation in the defence sector.
Some reactions to the budget
Defence Minister Rajnath Singh congratulated Finance Minister Nirmala Sitharaman for presenting a positive and encouraging ‘Interim Budget’. He added that there is big push for infrastructure, construction, manufacturing, housing and technology development in this Budget. On the increase of capital expenditure outlay, Rajnath Singh described it as a massive push, which will provide a big boost to making India a five trillion dollar economy by 2027.
Puneet Kaura, Chairman, CII Delhi State Council and MD & CEO, Samtel Avionics, a defence sector MSME, ” India’s journey towards self-reliance (“Atmanirbharta”) demands robust technological development, especially in critical areas like defence. In this context, Finance Minister Nirmala Sitharaman’s announcement in her budget speech to soon launch a new scheme to boost deep-tech for the defence sector is indeed a welcome decision. As we await the scheme’s details, it’s crucial for the government to actively support and encourage technological advancements across various defence segments. This will be instrumental in realizing the vision of a truly self-sufficient India.”
Ajay Singh, President, ASSOCHAM said, “It is an India first budget. A confident budget of a confident government that focuses on the objective of ensuring that India becomes a 5 trillion-dollar economy by 2025 and a developed nation by 2047. I commend the FM for her unwavering commitment to sabka saath, sabka vikas, sabka vishwas. I commend especially the increase in infrastructure spending that will have a multiplier effect on our economy. I commend the evident railway corridors, and the one lakh crore fund for research and development and the startup sector. The emphasis on clean energy, technology and digital infrastructure will make India a world leader. This is India’s moment, and this budget is part of a continuous process of making policy that will provide massive opportunities for India and Indians.”
Dr Anish Shah, President, FICCI said, ” The Interim Budget recognizes Innovation as a key driver for growth through introduction of a significant corpus of Rs 1 lakh crore for offering fifty-year interest free loan to scale up R&D in sunrise domains. The fiscal performance bodes well for country’s macroeconomic stability and investor confidence.”
Ashish Saraf, VP and Country Director, Thales-India stated, “We commend the government’s focus on tech-driven progress in the 2024 budget. The unveiling of a new scheme dedicated to bolstering deep-tech technologies for defence purposes is a testament to the commitment towards fostering self-reliance (‘Atmanirbharta’). This forward-looking initiative aligns seamlessly with the government’s visionary ‘Viksit Kaal’ objective. With the emphasis on ‘Aatmanirbhar Bharat’, this scheme will be pivotal for the growth and resilience of our nation’s defence sector in areas such as AI, Quantum, Analytics, and more. We are committed to supporting India’s self-reliance vision and are actively engaged with the local industry and academia to build trusted high-tech capabilities in-country. We are optimistic that together we are poised to propel India’s journey towards becoming a formidable force in defence manufacturing and exports on the global stage.”
Vinay Dube, Founder and CEO, Akasa Air stated, “The Interim Budget presented by Hon’ble Finance Minister is a fine reflection of new India and willstrengthen India’s position as a global economic powerhouse.
We would like to acknowledge the government’s efforts towards galvanising the nation’s aviation industry, by doubling the number of airports and fostering holistic air connectivity that enabled 1.3 crore Indian citizens to travel by air. The focus on inclusive and sustained growth is a welcome move and will
catalyse India’s progress. As India’s fastest-growing airline with an orderbook of over 200 aircraft, we are energised by the government’s continued focus on enhancing air transport infrastructure to make air travel accessible fora greater number of Indians.”
