The recent interim budget allocated ₹6,21,540.85 crore to the defence sector for 2024-25, a meek hike from last year’s allocation of ₹5.93 lakh crore. This amounts to 13.04% of the total budget indicating a futuristic move towards national security amid the growing threats from China, and also with the objective of promoting self reliance and exports. This allocation to defence for 2024-25 is higher by 18.35% than the allocation for 2022-23 and 4.72% more than the allocation of 2023-24.
The defence budget divided into four categories – Ministry of Defense (MoD) civil expenditure, defense services revenue expenditure, capital expenditure, pay and allowances and defense pensions. The share of the defence budget goes to 4.11% for civil organisations under MoD, 14.82% for revenue expenditure on sustenance and operational preparedness of arms and ammunition, 27.67% goes to capital expenditure for buying new weapons and military systems, 30.68% for pay and allowances to defense personnel and 22.72% for defense pensions.
To modernise the armed forces, the Indian government has increased capital expenditure compared to the 2023-24 budget. The interim budget for the year 2024-25 has allocated ₹1.72 lakh crore for capital expenditure on the military, up 6.2% from the ₹1.62 lakh crore allocations made in 2023-24. The defence services capital outlay for aircraft and aero engines is ₹40,777 crore, while a total of ₹62,343 crore was allocated for ‘other equipment’. An outlay of ₹23,800 crore has also been made for the naval fleet and ₹6,830 crore for naval dockyard projects.
The allotment is in line with the Long Term Integrated Perspective Plan (LTIPP) of the army, navy and air force, intended to fill the critical capability gaps through modernisation of the armed forces by purchasing new weapons, aircraft, warships and other military hardware in 2024-25. They include conventional submarines with air independent propulsion systems on board, 4.5 generation combat jets and predator drones.
The total revenue expenditure has been put down at ₹4, 39,300 crore, of which ₹1,41,205 crore would be put aside for defence pensions, ₹2, 82,772 crore for defence services, and ₹15,322 crores for the civil organisations under MoD. The revenue expenditure for the Indian army is ₹1, 92,680 crore for 2024-25, while the navy and the air force were allocated ₹32,778 crore and ₹46,223 crore respectively. Revenue expenditures have seen a rise compared to the 2023-24 budget, which indicates an increase in the allocation for stores, spares, repairs, and other services.
The objective is to endow with best maintenance facilities and support system to all platforms, including aircraft and ships and as well in procuring of ammunition and mobility of resources. It also facilitates daily expenditure of armed forces in strengthening the deployment in forward areas to take care of any possible event.
Amid the continued face-off at the Indo-China border, the government has allocated ₹ 6,500 crores (30%higher than 2023-24 and 160% higher than 2021-22) to the Border Roads Organisation for year 2024-25 to promote strategic infrastructure development in the border areas, including the development of Nyoma Airfield in Ladakh at an altitude of 13,700 feet, bridge connectivity to the southernmost Panchayat of India in Andaman and Nicobar Island, and strategic tunnels Shinku La tunnel in Himachal Pradesh and Nechiphu tunnel in Arunachal Pradesh.
Allocation to the Indian Coast Guard (ICG) for 2024-25 is ₹7.651.80 crore which is 6.31% higher over the allocation of 2023-24. Of this, ₹3,500 crore is to be incurred only on capital expenditure to facilitate the acquisition of fast moving patrolling vehicles, advanced electronic surveillance systems and weapons. This will give boost to address the emerging challenges faced in sea and provide humanitarian assistance to other nations.
An upward trend in defence capital expenditure promoting ‘Aatmanirbharta’ is continuing since 2020 reform measures as part of the ‘Atmanirbhar Bharat Abhiyan’. The announcement of one lakh crore corpus scheme to fortify ‘deep- tech’ technologies (such as artificial intelligence, aerospace, chemistry etc.) to provide long-term loans to tech-companies and the tax advantage to the start-ups will give further momentum to modernisation in the defence sector. According to defence experts, the newly announced scheme could have a positive impact on companies like Hindustan Aeronautics Ltd., Ashok Leyland Ltd., Zen Technologies Ltd., Mazagon Dock Shipbuilders Ltd., and other stocks that heavily spend on research and development facilities and products.
The budgetary allocation to Defence Research and Development Organisation (DRDO) has been increased to ₹ 23,855 crore in 2024-25 from ₹23,263.89 crore in 2023-24. A major share of this amount ₹13,208 crore is allocated for capital expenditure to strengthen the DRDO in developing new technology with special focus on fundamental research and supporting the private parties through the ‘Development-cum-Production Partner’(DcPP) model. 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 to attract youth interested in innovation and developing niche defece technology in collaboration with the DRDO.
India has been the third-highest military spender after the US and China since 2020. The Indian defense budget is gradually increasing since 2018. According to Stockholm International Peace Research Institute (SIPRI) defense budget for 2018 was $66.26B, a 2.63% increase from 2017; for 2019 was $71.47B, a 7.86% increase from 2018; for 2020 was $72.94B, a 2.05% increase from 2019; for 2021 was $76.60B, a 5.02% increase from 2020. The Lowy Institute Asia Power Index in its 2023 edition of “estimated military expenditure forecast” expects that the military expenditure of India by year 2030 would be 183 billion dollar after the USA (977 billion dollar) and China (531 billion dollar). China's defence budget continues to be higher than that of India's. India has spent $72.6 billion on its military in 2023-24 as against China's $225 billion.
The hike in the defence budget is reasonable but not sufficient considering requirements for military modernization in the current geopolitical scenario. As there is wide discrepancy between Indian and Chinese military expenditure, India cannot match China’s defence budget. However, it could prevent Chinese domination through a greater focus on technology driven modernisation and self- reliance. In fact, the enhanced budgetary allocation to a certain extent will facilitate equipping the armed forces with niche technology lethal weapons, aircraft, warships and other military hardware. Meanwhile, the enhanced share for the domestic procurement is likely to boost the domestic industry and demands foreign manufacturers to be a part of make in India. In future, some more funds may be generated by the short term duty scheme ‘Agnipath’ by reducing the expenditure on pensions.
(Disclaimer: The opinions expressed here are those of the author)
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