This year’s budget speech by the finance minister, for the first time, did not mention anything in the defence sector. In her Budget speech Finance Minister Nirmala Sitharaman on Feb 1, 2023 stated that the budget for capital expenditure has also increased by around Rs 10,000 crore, reaching a total of Rs 1.62 lakh crore.
The Defence Budget details shared by the Ministry of Defence (MoD) have indicated that there is a hike from Rs 1.52 lakh crore to Rs 1.62 lakh crore. A significant part of this allocation is expected to be used for the procurement of equipment and weapons from private sector companies under the government’s “Make in India” initiative.
The documents indicate that Rs 2.70 lakh crore has been allocated for revenue expenditure, and this includes the maintenance for establishments and salaries. And Rs 1.38 lakh crore has been assigned for the defence pensions.
While the Indian Air Force is set to take a decision to acquire new fighters for its depleting fleet – both indigenous as well as next generation (4.5) fighters, the Indian Navy too is expected to announce soon its selection of the fighters for its aircraft carrier INS Vikrant.
More submarines, naval guns, frigates and destroyers, underwater vehicles, are on the wish list of the Indian Navy which has been focusing on indigenisation as well placing orders with start-ups under the iDEX initiative.
The Army which has set in motion its modernisation plans is working towards starting the process of acquiring Light Battle Tanks, Artillery guns, armoured vehicles, tanks and artillery guns for its operational requirements on the Ladakh front.
Also Read: Defence allocation in Budget 2023 sees moderate increase due to pension’s bill
“Being the budget speech before India’s general elections in 2024, the budget is aimed at appeasing the middle class, who bears the brunt of the tax regime,” opines Indian Army Veteran and Defence Analyst Lt Col Manoj K Channan.
In his opinion the budget allocation indicates that the assessment of the government is a status quo at the Line of Actual Control (LAC) and the Line of Control (LoC) and no major escalations in the security environment internally and externally.
“The total capital allocation for defence is Rs 1.62 Lakh crores. The Army has an increase of 16.32 percent, the Navy 10.96 percent and the Air Force 2.79 percent. Significant allocations have been made for operational requirements at the LAC. The Border Roads Organisation (BRO) has had a substantial jump in its budget by 43 percent,” Lt Col Channan adds.
The DRDO has increased its funding by 9%. For innovation and startups in the defence sector, an allocation of Rs 161 Crores has been made.
Industry Comments
According to Gaurav Mehndiratta, Partner and Head, Aerospace and Defence, KPMG in India that CAPEX allocation for defence misses a commensurate reflection of the government’s impetus on defence manufacturing. Capex for defence gets a nominal increase of 7 percent versus 33 percent increase in the nation’s overall capital expenditure commitment.
The 2023 budget has introduced several benefits that will be beneficial for the defense community, says Ravi Kumar, Founder and CEO, udChalo. In his view the tax exemption for contributions to the Agniveer Corpus Fund by those enrolled under the Agnipath Scheme, 2022, is a positive step for the defense community.
