Explained: Why India hiked its Defence budget and where will Modi govt spend it?
By Girish Linganna | First Published Feb 2, 2024, 7:05 AM ISTThe defense allocation of Rs 6.21 lakh crore focuses on advanced technology, representing 1.89% of the estimated GDP. The budget emphasizes modernization, addressing capability deficiencies, and enhancing self-sufficiency, says Girish Linganna
Based on the January 2024 economic review by the finance ministry, despite the pandemic and inheriting an economy with imbalances and a distressed financial sector, the country has made significant progress. It currently holds the position of the fifth-largest global economy, with a GDP of approximately $3.7 trillion (estimated for FY24). Please note that a trillion US dollars is equal to approximately a lakh crore rupees
Experts believe that the Rs 47.66 lakh crore budget, presented by Finance Minister Nirmala Sitharaman, establishes a strong foundation for transforming India into a 'Viksit Bharat' or developed nation by 2047. India has allocated Rs 6.21 lakh crore for defence in its provisional budget for 2024-25, which is a 4.72 per cent increase from last year's initial budget but slightly less (0.37%) than the revised budget of 2023-24.
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The finance minister also introduced a new plan to enhance advanced technology or deep technology in the defence sector. Deep technology refers to advanced scientific and technological innovations that have the potential to bring about significant and transformative changes to various industries. These technologies often involve cutting-edge research and development, such as artificial intelligence, biotechnology, blockchain, and quantum computing. Their impact can be profound and far-reaching, revolutionizing the way we live, work, and interact with the world around us.
The defence budget for this year represents 1.89% of the nation's estimated GDP for the fiscal year 2024-25. The budget comprises a revenue spending of Rs 2.82 lakh crore, a capital investment of Rs 1.72 lakh crore, and a pension allocation of Rs 1.41 lakh crore. The capital outlay for upgrading the military's capabilities is 5.78 per cent greater than the previous year. India is upgrading its armed forces with the acquisition of new fighter jets, helicopters, warships, tanks, artillery, rockets, missiles, unmanned systems, and various other combat technologies.
The defence ministry stated, "Given the present global political climate and the dual goals of fostering self-sufficiency and boosting exports, the defence budget has reached Rs 6,21,540.85 crore for the fiscal year 2024-25. This amount represents 13.04 per cent of the total budget."
The statement highlights that the increased capital outlay aims to address crucial capability deficiencies by means of modernization. Additionally, it emphasizes that this investment will contribute to enhancing self-sufficiency within the sector. According to the statement, the budget will finance various initiatives such as the modernization of the current Sukhoi-30 fleet, the procurement of additional aircraft, the acquisition of advanced engines for MiG-29s, the acquisition of C-295 transport aircraft, missile systems, deck-based fighters, and submarines.
India's defence budget last year was Rs 5.93 lakh crore, which included a capital outlay of Rs 1.62 lakh crore.
During her Budget speech, Finance Minister Nirmala Sitharaman announced the launch of a new scheme to enhance deep-tech technologies for defence purposes and accelerate self-reliance. However, specific information regarding the scheme was not immediately provided. It is believed that the initiative will provide ample funding, incentives, and support to the defence sector, especially to start-ups and MSMEs involved in these fields.
According to the revised estimates in the budget documents, the armed forces were unable to utilize Rs 5,372 crore from the capital outlay of ₹1.62 lakh crore allocated in the previous year. In the fiscal year 2022-23, due to border tensions with China, the armed forces spent approximately Rs 21,000 crore in addition to the previous year's budget allocation. This was done to make emergency purchases and prioritize the development of infrastructure in forward areas.
The revised estimates for the fiscal year 2023-24 indicate that the revenue expenditure exceeded last year's allocation by Rs 28,548 crore. This increase was primarily due to expenses related to pay and allowances, transportation, the ex-servicemen contributory health scheme, and expenses related to the Rashtriya Rifles.
In 2022-23, India allocated Rs 5.25 lakh crore for military expenditure, while in the previous year, 2021-22, it allocated Rs 4.78 lakh crore. The allocation for military spending in the year before that, 2020-21, was ₹4.71 lakh crore. A significant part of this year's allocation will be used to purchase locally manufactured advanced weapon systems, which will have a positive impact on the country's GDP, generate employment opportunities, encourage capital formation, and stimulate the domestic economy.
The Border Roads Organisation (BRO), which plays a crucial role in enhancing India's border infrastructure, has been allocated Rs 6,500 crore. This allocation is 30 per cent higher than the previous year (FY 2023-24) and 160 per cent higher than the year before (FY 2021-22). The increase is in response to the ongoing security concerns at the India-China border. This demonstrates the government's dedication to improving border infrastructure.
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