Major announcements in defence sector expected, including export regulations, revision of Agnipath scheme

The upcoming Budget is expected to bring significant developments in the defence sector, with a strong emphasis on the 'Make in India' initiative. The Modi 3.0 government is poised to enhance Research & Development within the defence realm.

With India's military spending now the fourth largest globally, the government remains focused on modernisation, self-reliance, and boosting defence exports, which reached a record ₹21,083 crore in FY23-24.

Over the past four years, India's defence budget allocation has consistently increased. At ₹4.71 lakh crore in 2020, it increased to ₹4.78 lakh crore in 2021, ₹5.25 lakh crore in 2022, and ₹5.94 lakh crore in 2023. The anticipated budget for 2024 is projected to exceed ₹6 lakh crore, highlighting a steady upward trend.

This year, Finance Minister Nirmala Sitharaman is likely to introduce additional 'Make in India' initiatives in the defence sector. There may also be further easing regulations on defence equipment exports and introducing a new list of weapons and other equipment.

The Agnipath scheme, which aims to reduce India's growing defence salary and pension expenses, has faced opposition from political parties and some experts.

In light of the criticism, experts anticipate that the government might revise the Agniveer policy based on the Indian Army's reform recommendations. These proposed changes include extending service tenure from four to eight years, increasing retention rates by 60-70%, and raising the induction age for technical services to 23 years.

India's expanding economic strength has bolstered its military spending, ranked as the fourth largest globally in 2022. According to an Observer Research Foundation (ORF) report, the Ministry of Defence's expenditure has more than doubled over the past decade, although annual growth has been highly variable.

The Centre is expected to continue advancing its Viksit Bharat theme and remain committed to modernising and developing the Defence services' infrastructure.

China’s activities at the border present ongoing challenges for India's defence sector in maintaining territorial integrity. The defence budget is anticipated to address the rapidly shifting global geopolitical landscape.

Experts suggest that the government should maintain its dual objectives for the defence sector: promoting self-reliance and increasing exports. India's transformation from a net importer to a net exporter is evident in its defence exports reaching a record high of ₹21,083 crore in FY 2023-24, a 32.5% increase from the previous fiscal's ₹15,920 crore. Additionally, India achieved its highest-ever defence production value of approximately ₹1.27 lakh crore in 2023-24.