Budget Expectations for the Defence Sector

Key Takeaway

• The previous budgets have reflected a commitment to boost India's defence capabilities.
• Defence Pension Budget underlines the government's commitment to the welfare of veterans, which is essential for sustaining morale and preparedness within the armed forces.
• The upcoming budget is imperative for considering the requirement for modernisation and increased combat capabilities to tackle security threats effectively.

"This nation will remain the land of the free only so long as it is the home of the brave." - Elmer Davis

India has one of the world's largest military forces with a strength of over 14.4 lakh active personnel. We also have the world's largest volunteer military with over 51 lakh personnel. The defence industry in India is experiencing growth, with a strong focus on self-reliance and advanced capabilities.

The public sector plays a major role in India's defence production, holding a share of nearly 80% and the government has been increasing its capital spending since the past decade. Moreover, the defence manufacturing industry in India has set ambitious goals. Since, it has seen a jump of 13% in budget allocation to ₹5.94 lakh crore in 2023-24.

Previous Defence Budgets Recap

In the Union Budget 2022-23, the defence budget saw an increase from ₹4.71 lakh crore to ₹4.78 lakh crore. The total allocation, including pensions, stood at ₹3.62 lakh crore. Out of this, ₹1.35 lakh crore of the total allocation was planned for the purchase of warships, aircraft, and new weapons.

Last year, the defence services received a significant budget hike, with an allocation of approximately ₹5.94 lakh crore for the fiscal year 2023-24. The modernisation budget was also increased to around ₹1.62 lakh crore for the acquisition of weapon systems and equipment from Indian firms. Moreover, the pension budget for the forces saw an increase to about ₹1.38 lakh crore. There was a 15.5% increase in the Defence Pension Budget, underlining the government's commitment to veterans' welfare.

There was an extended allocation of ₹23,264 crore to Defence Research and Development Organisation (DRDO). It aimed at strengthening research and development endeavours in the country. Plus, it demonstrated emphasis on indigenous innovation through budgets for Innovation for Defence Excellence (iDEX) and Defence Testing Infrastructure Scheme (DTIS), marking a 93% and 95% increase, respectively.

Modernisation and Combat Capabilities

The defence sector has been burdened with the need for modernisation and increased combat capabilities due to rising security threats. However, the allocated budget amounts have been considered insufficient by defence experts to meet these demands.

The delay in modernisation is evident as the armed forces still use outdated military equipment and gear, such as AK-47s and Indian Small Arms System (INSAS) rifles, which do not match global standards.

Expectations for the Upcoming Budget

The defence budget needs an increased provision to meet the demands of modernisation and combat readiness. Defence experts have been advocating for an increase in the defence budget to around 3% of GDP.

To cope with the contractual obligations and resource allocation for modernisation, a significant budget hike is imperative. Additionally, to address salary hikes, pension funds, and strategic needs, a substantial increase in the defence budget is also necessary.

There should be a key focus on boosting indigenous innovation initiatives like iDEX and DTIS, as they are important for reducing dependency on foreign imports and advancing in self-reliance in defence production. The budget should also continue to prioritise infrastructure development with a focus on addressing critical combat capability gaps. Finally, it must emphasise the balance between strategic partnerships, operational requirements, and Aatmanirbharta (self-reliance). Plus, it lines up with global geopolitical dynamics.

Conclusion

The upcoming budget for the defence sector in India should focus on sustaining the momentum of modernisation and indigenisation. Also, keeping an eye on research and development and strategic partnerships with domestic industries. This could in fact contribute to the strengthening of India's defence infrastructure. The increased allocation to the pension fund would support the welfare and financial security of retired military personnel, further fostering confidence and stability within the defence sector. Leading to reinforcing India's defence capabilities.