The Defence budget for FY2023-24 has been increased to Rs 5.94 lakh crore which is around 13.02 percent higher than the last year’s allocation of Rs 5.25 lakh crore and 1.97 per cent of the estimated GDP (gross domestic product). The pension’s bill has gone up significantly due to the recent revision of One Rank One Pension scheme (OROP) and this has resulted in an additional annual expenditure of approximately Rs 8,450 crore.
This year there was no mention of defence in the budget speech delivered by the Finance minister Nirmala Sitharaman.
Understanding the Defence Budget
According to Amit Cowshish, former Financial Advisor (Acquisition), Ministry of Defence, “It is arguably the second largest single item of expenditure in the Union Budget after interest payment, accounting for 13.18 per cent of the total central government outlay of Rs 45,03,097 crore.”
“Out of the total defence outlay, the armed forces have been allocated Rs 2, 70,120.14 crore and Rs 1, 62,600.00 crore, up from Rs 2, 33,000.54 crore and Rs 1, 52,369.61 crore, for revenue and capital expenditure respectively,” Cowshish explained to Financial Express Online.
In his view, “The year-on-year increase of 15.93 per cent in the revenue budget has clearly impacted the Capital Outlay which has gone up just 6.71 per cent. The pensions budget of Rs 1, 38,205 crore -an increase of 15.46 per cent- also seems to be a factor in this moderate increase in the capital outlay.”
Adding, “The overall increase of 12.29 per cent in the armed forces’ allocation is as anticipated, but it would be disappointing for the defence planners who must be expecting a substantial increase to acquire the much-needed military capabilities.”
A total of Rs 1.62 lakh crore has been set aside for capital expenditure; this includes procurement of new military platforms and weapons – aircraft, warships, and other hardware.
According to Budget documents of 2023-24 Budget documents, an allocation of Rs 2, 70,120 crore has been made for Revenue Expenditure. This expenditure includes expenses related to payment of salaries and maintenance of establishments. In FY2023, the budgetary allocation of revenue expenditure was Rs 2, 39,000 crore.
In the Budget for 2023-24, the capital outlay for the Ministry of Defence (Civil) has been pegged at Rs 8,774 crore while an amount of Rs 13,837 crore has been set aside under capital outlay.
According to the budget papers for defence pensions a separate amount of Rs 1, 38,205 crore has been allocated.
Importance of the Capital Expenditure
To meet the growing threats from Pakistan and China the hike in Capital expenditure is important as it helps in India’s efforts to become self-reliant in the defence manufacturing in the defence sector and adopting the latest technologies and expanding the infrastructure.
According to the numbers the Indian Air Force takes Rs 57.13 thousand crore which is major pie in modernization outlay among all three services:
Indian Navy gets Rs 52.80 thousand crore which is almost 10 per cent increase in Capital outlays. It is also almost 18 per cent of the Defence budget as against 17.5 percent of last fiscal.
Indian Army gets Rs 37.24 thousand crore.
In an effort to match the infrastructure development by China on its side of Line of Actual Control (LAC) the budget allocation for the Border Roads Organisation (BRO) gets a huge push of 43 percent in its allocation for the next fiscal. This will help BRO ramp up the infrastructure on the #Budget2023 to ramp up infrastructure on Indian side of LAC
Reaction to the Budget
Captain Nikunj Parashar, Founder & MD of Sagar Defence Engineering says: “Entrepreneurship is critical for a country’s economic progress, as our Finance Minister Nirmala Sitharaman stated. It is exemplary to see that the Union Budget included start-up-friendly initiatives to give a contingency to start up to recover their losses and focus more on enhancing technological advancement of their innovations, research, and development.”
“By announcing the construction of fifty new airports, heliports, water aerodromes, and sophisticated landing strips to improve regional air connectivity, we have received a significant boost in our efforts to innovate further in the field of Urban Air Mobility and create efficient solutions such as Varuna,” Capt Parashar adds.