The Defence Ministry has been allotted Rs 5.93 lakh crore, up from Rs 5.25 lakh crore in the 2022-23 budget. There is a 12.95 per cent hike in the total Budget compared to last year’s revised estimates (money that was spent).
Capital expenditure increased but was not adequate
A total of Rs 1.62 lakh crore has been set aside for capital expenditure, including purchasing new weapons, aircraft, warships and other military hardware; the capital outlay has been hiked to Rs 1.62 lakh crore, an Rs 10,000 crore hike from last time. The armed forces have yet to be able to spend the total amount of Rs 1.52 lakh crore allotted in the last Budget. This is because the air force surrendered Rs 1,837 crore as per the revised estimates.
The relatively small hike in capital expenditure has disappointed the industry. “Capex for Defence gets a nominal increase of 7 per cent vs 33 per cent increase in the nation’s overall capital expenditure commitment. This capex allocation needs to include the Government’s impetus on Defence manufacturing.
The Government also increased the capital budget of the Border Roads Organisation by 43 per cent to Rs 5,000 crore against Rs 3,500 crore in FY23. The increase will boost border infrastructure and assist in implementing projects like the Sela Tunnel, Nechipu Tunnel and Sela-Chhabrela Tunnel. This will improve defensive preparedness and capability to move troops from the rear areas into forward areas on the Indo-China border.
Capital expenditure in the Defence sector is crucial for India’s aim to become self-reliant in Defence manufacturing and to meet a rising challenge from China and Pakistan by creating infrastructure and adopting modern technology. In the last few years, the Government has encouraged domestic manufacturing while reducing exports under the Defence ecosystem of India. The exports in the sector surged nearly eight times to Rs 12,815 crore in 2021-22 from Rs 1,521 crore in 2016-17.
PLI scheme in helping in self-sufficiency
In September 2022, the Government introduced the PLI scheme to spur the manufacturing of drones and drone components in India. The Defence Ministry had, in December last year, approved the procurement of arms worth over Rs 84,300 crore to boost the combat capabilities of the Defence forces. This amount included approval for six capital acquisitions for the Indian Army, 10 for the Indian Navy, six for Indian Air Force, and two for Indian Coast Guard.
Revenue expenditure increases
The increase in the Budget is mostly on account of a peak in revenue expenditure (Rs 2.7 lakh crore) projected for the financial year.
Allocation of Rs 2 70,120 crores has been made for revenue expenditure, including expenses on salaries and maintenance of establishments. The budgetary allocation of revenue expenditure in 2022-23 was Rs 2, 39,000 crores. “The allocation under this segment has doubled in two years since FY 2021-22.
This will cater to the sustenance of Weapon Systems, Platforms including Ships/Aircraft & their logistics; boost fleet serviceability; emergency procurement of critical ammunition and spares; procure/hiring of niche capabilities to mitigate capability gaps wherever required; progress stocking of military reserves strengthening forward Defences, amongst others.
Ministry of Defence has been allocated a total Budget of Rs 5,93,537.64 crore, which is 13.18 % of the total budget. This includes an amount of Rs 1,38,205 crore for Defence Pensions. The total Defence Budget represents an enhancement of Rs 68,371.49 crore (13%) over the Budget of 2022-23
The enhanced allocations in the Budget will also cater to Training Aids & Simulators for Agniveers and ensure that they achieve the set standards of training for induction in the Defence Forces.
The revenue expenditure has increased drastically due to the constant deployment of 50- 60000 troops on the Indo-China border to meet various contingencies of intrusion by the Chinese. In addition, the troops have to be rotated at regular intervals. This results in an increase in revenue expenditure, which cannot be avoided.
Defence pensions have gone up considerably
The expenditure on Defence pensions has gone up considerably over arrears being disbursed under the One Rank-One Pension (OROP) scheme, and the ballooning Defence pension bill is estimated to cost Rs 1.38 lakh crore. The pension’s expenditure has exceeded budgetary estimates of last year (Rs 1.53 lakh crore against the estimated Rs 1.19 lakh crore) on account of OROP arrears being paid out. Rs 23,600 crore worth of arrears is being paid out.
Recruitment of Agniveer has already started. They will not be given pensions. As a result, pension bills will start reducing in the years to come.
Underutilisation of Technology Development Fund but
The Government had allocated Rs 1,364 crore in the last Budget for a technology development fund for developing prototypes under the ‘Make Procedure’. , But Industry-led development of new military projects has failed to take off despite adequate budgetary allocations last year. The industry/armed forces could only spend Rs 122 crore out of this allocation.
While several projects under this scheme – including anti-drone systems, 155 mm guided munitions and loitering munitions – have been cleared by the Ministry, the process to allocate them to the industry still needs to be completed.
Towards strengthening Research and Development in Defence, the allocation to DRDO has been enhanced by 9 per cent, with a total allocation of Rs 23,264 crore in BE 2023-24. Still, the DRDO must be more accountable and finish projects on time.
To further foster innovation, encourage technology development and strengthen the Defence Industrial ecosystem in the country, iDEX and DTIS have been allocated Rs 116 crore and Rs 45 crore, respectively, representing an enhancement of 93 per cent for iDEX and 95 per cent for DTIS over 2022-23. This will fulfil the Ministry of Defence’s vision to leverage ideas from bright young minds across the country. The MOD Bureaucracy must work overtime and clear projects speedily.
Vibrant village program for securing border areas, improving tourism
The Government has decided to encourage tourism in border areas and speed up vibrant village program in the border areas that is to relocate villages on our side of the border right up to the China border so that they become eyes and ears of the security forces and keep watch on any enemy intrusions that may take place. Sustained efforts in developing Jammu Kashmir, Ladakh and Northeast are good for the Army as it benefits due to improved infrastructure, especially in the mountainous border areas. Investment in infrastructure outlay is increasing by 33 per cent.
Increase in MHA Budget good for improving internal security
Rs 1.96 lakh crore allocated to Home Ministry. Sending a clear message about its internal security priorities, the Government allocated Rs 1.96 lakh crore to the Ministry of Home Affairs (MHA), with a majority of the spending on Central Armed Police Forces such as CRPF and intelligence gathering.
The 2023-24 budget allocation to the MHA is Rs 1, 96,034.94 crores. The Budget 2022-23 had earmarked Rs 1, 85,776.55 crores. A substantial amount has also been allocated for improving infrastructure along the international border, police infrastructure and modernisation of police forces.
The bulk of the amount of the MHA, Rs 1,27,756.74 crore, has been allocated to the Central Armed Police Forces (CAPFs) compared to Rs 1,19,070.36 crore in 2022-23.
Among the CAPFs, the Central Reserve Police Force (CRPF), mostly responsible for internal security duties and fighting militancy in Jammu and Kashmir, has been allocated Rs 31,772.23 crore in comparison to Rs 31,495.88 crore given in 2022- 23.
Besides handling internal security assignments, the Border Security Force (BSF), which guards India’s border with Pakistan and Bangladesh, has been given Rs 24,771.28 crore compared to Rs 23,557.51 crore in the current Budget.
The Central Industrial Security Force (CISF), which protects vital installations such as nuclear projects, airports and metro networks, has been given Rs 13,214.68 crore compared to Rs 12,293.23 crore allocated in 2022-23. The Shashastra Seema Bal (SSB), which guards India’s borders with Nepal and Bhutan, has been allocated Rs 8,329.10 crore compared to Rs 8,019.78 crore given in 2022-23. The Indo-Tibetan Border Police (ITBP), which guards the Sino-Indian border, got Rs 8,096.89 crore compared to Rs 7,626.38 crore in the current year.
The Assam Rifles, deployed along the India-Myanmar border and for anti-insurgency duties in the Northeast, has been allocated Rs 7,052.46 crore compared to Rs 6,561.33 crore given in the current year.
The National Security Guard (NSG), the elite commando force to tackle any emergency security situation, has been allocated Rs 1,286.54 crore compared to Rs 1,183.80 crore given in 2022-23. The Intelligence Bureau has been given Rs 3,418.32 crore compared to Rs 3,022.02 crore in the current fiscal year. The Special Protection Group (SPG), which protects the Prime Minister, has been allocated Rs 433.59 crore compared to Rs 411.88 crore given in 2022-23. The Delhi Police has been given Rs 11,662.03 crore compared to Rs 11,617.59 crore in 2022-23.
A sum of Rs 3,545.03 crore has been allocated for the development of border infrastructure, like the construction of roads and bridges, compared to Rs 3,738.98 crore allocated in the current fiscal. Rs 3636.66 crore has been given for the development of police infrastructure compared to Rs 2,188.38 crore allocated in 2022-23.
For the modernisation of police forces in the country, the Budget allocated Rs 3,750 crore compared to Rs 2,432.06 crore in 2022-23. Rs 2780.88 crore has been allocated for security-related expenditure compared to Rs 2,024.54 crore in the current year. The Budget also allocated Rs 1,100 crore for women’s safety schemes, Rs 700 crore for the modernisation of forensic capacities, Rs 350.61 crore for maintenance of border check posts and Rs 202.27 crore for Modernisation Plan IV for CAPFs.
The increase in the MHA budget will improve the internal security and management of borders with Bangladesh, Nepal, Bhutan and Myanmar and the International border with Pakistan which is banned by capf forces. The security challenges on these borders are the smuggling of arms, ammunition, drugs, fake Indian currency notes and illegal human migration, especially on the Bangladesh border.
The sea borders are also porus, and a lot of illegal trade and smuggling of drugs and other illegal goods takes place from these borders.
Conclusion
Defence stocks had rallied up to 8 per cent ahead of the Budget. The defence sector wanted an increase in the outlay indigenisation, which means an emphasis on local production. This year a significant budget has been allotted for the space and research, electronic equipment and advancement for further localisation.
The GOI fosters healthy competition in Defence by launching various PLI schemes. This would improve the quality of Defence products and services and further enhance the Defence sector.
Despite very serious challenges posed by the Indian economy due to the spread of Corona in China, recession in most parts of the world and economic uncertainties due to Russia Ukraine war, the country has still managed to increase its Defence Budget. This is creditable.
The exponential increase in the Budget for improving the country’s infrastructure will help the armed forces in the border areas. An increase in capital expenditure will also help achieve Atmannirbharta in Defence manufacturing and improve the security environment in the country.
India’s economy is growing at a fast speed than the whole world. This will also ensure that the defence budget gets additional funds for furthering defence preparedness in the days to come.
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