Defence Budget Analysis: FY’25 – Key Highlights and Concerns

By Amit Cowshish

The budget estimates (BE) of defence expenditure have been pegged at Rs 6,21,740.85 crore in the union budget for the coming fiscal ’25 presented by Finance Minister Nirmala Sitharaman earlier today.

The proposed outlay is Rs 28,203.21 crore higher than the current financial year’s allocation, but Rs 2,148.09 crore less than the revised estimates (RE) of the current year that ends on March 31.

Sitharaman made no mention of the defence outlay, which is not surprising given the fact that the paltry BE-to-BE increase of 4.75 per cent in the proposed outlay is perhaps one of the lowest in the recent year. Just last year, the budget outlay was hiked by 9.82 per cent.

The allocation accounts for 13.05 per cent of total central government expenditure, and 1.9 per cent of the estimated nominal gross domestic product of FY ’25. These percentages are slightly lower than the corresponding figures for the current financial year, but otherwise, this is in keeping with the general trend witnessed over the last few years.

The revenue and capital budget of the defence services, totalling Rs 4,54,972.67 accounts for three-fourths of the total defence budget. Of this, Rs 2,82,772.67 crore has been allocated for revenue expenditure and the remaining Rs 1,72,200 crore for acquisition of equipment and weapon systems, land, and works. The increase works out to 4.68 per cent and 5.9 per cent respectively, or an overall increase of 5,14 per cent. The armed forces would be disappointed.

There has been a significant increase in the revenue expenditure of the armed forces during the current financial year from Rs 2,70,120.14 crore to Rs 2,98,668.75 crore. And though the proposed revenue budget of Rs 2,82,772,67 crore is less than the RE of the current year, it is obvious that the Ministry of Finance’s reluctance to allocate additional funds for revenue expenditure at the RE stage is a thing of the past. The armed forces can expect additional funds later this year if the need arises.

The capital budget of the armed forces has been reduced by Rs 5,371,80 crore in the RE which is a worrying throwback to the old times when the Ministry of Defence (MoD) used to struggle to utilize the capital budget. Considering that the allocation for the FY ’25 is almost Rs 15,000 crore higher than the RE ’25, MoD will have to strive harder this year.

Expenditure on defence pensions seems to have stabilized. The actual expenditure in FY ’23 was Rs  1,53,406.90 crore, against which the RE for the current year is Rs  1,42,095 and the BE for the coming year ’25 is still lower at Rs  1,41,205. It would be interesting to study how this feat has been achieved.

The government’s focus on infrastructure development along the borders and coastal security remains unabated. The funds allocated for works to be executed by the Border Roads Organisation (BRO) have been increased from Rs  6,005 crore to Rs  7,805 crore. The Coast Guard Organisation has not seen a similar hike but the increase from Rs  7,197.47 crore to Rs  7,651,80 crore is not insignificant.

While avoiding any number crunching, Finance Minister Sitharaman announced in her budget speech that a new scheme will be launched for strengthening ‘deep-tech technologies for defence purposes’ and expediting ‘atmanirbharta’. Hopefully, the scheme will be launched sooner rather than later.

The author is a Former Financial Advisor (Acquisition), the Ministry of Defence.

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