Ms Shobhana Joshi
Themes and Challenges
The allocation made to the Ministry of Defence in the interim budget presented earlier this year, was Rs. 6,21,540 crore. In the first budget presented by the new government, the allocation for the financial year 2024-25 is Rs. 6,21,940.85 crore showing a marginal increase of Rs 400.85 crore. This additional amount over the interim budget is for innovation in defence through the Acing Development of Innovative Technologies with iDEX (ADITI) scheme launched in March 2024, during DefConnect 2024.
The BE 2024-25 allocation is 4.79% higher than BE 2023-24. Out of this, a share of 27.6% is for capital expenditure; 14.8% for revenue expenditure on sustenance and operational preparedness; 30.7% for pay and allowances; 22.7% for Defence Pensions, and 4.2% for MoD(Civil). The total allocation is 12.9% of the Budget Estimates of the Union of India. Grant wise details are given below:
| Demand No | Revenue | Capital | Total | % |
| 19. Ministry of Defence (Civil) | 1,57,22.33 | 10,240.85 | 2,59,63.18 | 4.2 |
| 20. Defence Services (Revenue) | 2,82,772.67 | 2,82,772.67 | 45.5 | |
| 21. Capital Outlay on Defence Services | 1,72,000.00 | 1,72,000.00 | 27.6 | |
| 22. Defence Pensions | 1,41,205.00 | 1,41,205.00 | 22.7 | |
| Total | 4,397,00.00 | 1,82,240.85 | 6,21,940.85 | 100 |
Allocations for Defence Services
The allocation for the Defence Services is 5% more than BE 2023-24. However, it is marginally lower than RE 2023-24. The Revenue Capital breakup for BE and RE 2023-24 and BE 2024-25 is as follows:
| (Rs Crores) | Revenue | Capital | Total |
| BE 2023-24 | 2,70,120.14 | 1,62,600.00 | 4,32,720.14 |
| RE 2023-24 | 2,98,668.75 | 1,57,228.20 | 4,55,896.95 |
| BE 2024-25 | 2,82,772.67 | 1,72,000.00 | 4,54,772.67 |
Focus Areas
The budget has focused on some key areas which highlight the priority given to them for the development of a domestic defence ecosystem.
Jointness for Capital Allocation
The Interim budget changed the structure of the capital budget and put it under one single head ‘Defence Services’ instead of a separate service-wise allocation. Ministry of Defence had in a statement clarified that this was a conscious call to foster jointness among the services by consolidating the demand of the three services into similar items of expenditure such as Land, Aircraft and Aero-engines, Heavy and Medium Vehicles etc. The regular budget has also allocated capital expenditure under ‘Defence Services ‘ head only. It is hoped that this change will result in a more integrated approach in the planning process which will no longer be defined by boundaries set by the budget allocated to each service. The formulation of the capability development plan and annual acquisition plans should consequently be holistic and not be an aggregation of service and arm wise demands, but be dictated by needs based on threat perception and overall strategic focus.
The allocation for Defence Services is Rs. 1,55,475.52 crore. However, Land and Construction Works has also been included. If this allocation is excluded, then the allocation for defence acquisition would be 1,41,129.41crore. The adequacy of this amount for modernisation of the armed forces is a question which still needs to be addressed. Details of the allocation from the budget documents are given below:
Defence Services (Rs in crore)
| Major Head | Description | Allocation ( Rs Crore) |
| 28 | Land | 2,329.36 |
| 29 | Aircraft and Aero Engines | 40,277.86 |
| 30 | Heavy and Medium Vehicles | 4,637.88 |
| 31 | Other Equipment | 62,198.02 |
| 32 | Joint Staff | 1,352.98 |
| 33 | Procurement of Rolling Stock | 200 |
| 34 | ECHS | 41.5 |
| 35 | Rashtriya Rifles | 200 |
| 36 | National Cadet Corps | 17 |
| 37 | Construction Works | 12,016.75 |
| 38 | Naval Fleet | 23,800.00 |
| 39 | Naval Dockyard/ Projects | 6,830.00 |
| 40 | Special Projects | 1,574.17 |
| Total-Defence Services | 1,55,475.52 |
Focus on Indigenous Capacity
The budget continues with the focus on building up indigenous production of weapons and systems and 75% of the modernisation budget, amounting to Rs 1,05,518.43 crore, has been earmarked for procurement through domestic industries.
The allocation on innovation in defence through iDEX has been enhanced from from Rs 115 crore in BE 2023-24 to Rs 518 crore in the current fiscal year, which will boost start-ups/MSMEs/innovators in developing Def-Tech solutions and encourage young entrepreneurs.
The allocations under assistance for prototype development under ‘Make Procedure; has received a substantial step up, from Rs 1231.61 crore to Rs 1797.48 crore, an increase of 46%. However, the RE 2023-24 was Rs. 389.89 crore, so the utilisation of funds needs to keep pace with the allocations.
Incentives to defence industry
The incentives provided in the budget, especially exemption given on minerals critical to the defence sector, are a positive step to help further develop the defence industrial ecosystem.
- Basic Customs Duty (BCD) on components and consumables for use in the manufacture of specified vessels and technical documentation and spare parts for construction of warships has been reduced to nil.
- 25 minerals critical for the Defence and Space sector have been fully exempt from customs duties and BCD reduced on two of them.
- The duration for export in case of aircraft and vessels imported for maintenance, repair and overhauling has been increased from six months to one year, which shall be further extendable by one year. Further, the time period for duty-free re-import of goods (other than those under export promotion schemes),which had been exported out from India, for repairs under warranty has been increased from three years to five years, which shall be further extendable by two years.
Development of Border Infrastructure for strategic requirements
The allocation to Border Roads Organisations (BRO) under capital for BE 2024-25 at Rs 6,500 crore, is 30% higher than the allocation for FY 2023-24. Projects such as development of Nyoma Airfield in Ladakh at an altitude of 13,700 feet, permanent bridge connectivity to the southernmost point of India in Andaman and Nicobar Islands, 4.1 km strategically-important Shinku La tunnel in Himachal Pradesh, are some of the important projects which will be funded out of this allocation.
Improvement of Indian Coast Guard capabilities
The allocation to the Indian Coast Guard is Rs 7,651.80 crore, which is 6.31% higher over the allocation of FY 2023-24. Out of this, Rs 3,500 crore is to be incurred only on capital expenditure, to cater for the emerging maritime challenges and providing humanitarian assistance to other nations. The allocation will facilitate the acquisition of fast-moving patrolling vehicles/interceptors, advanced electronic surveillance systems and weapons.
Self-reliance through Research and Development
The allocation to Defence Research and Development Organisation (DRDO) has been increased by Rs. 592 crore in BE 2024-25 to Rs 23,855 crore in FY 2024-25 from Rs 23,263.89 crore in FY 2023-24. Out of this allocation, a major share of Rs 13,208 crore is allocated for capital expenditure. The allocation to Technology Development Fund (TDF) scheme stands out to be Rs 60 crore which is especially designed for new start-ups, MSMEs and academia attracting the young talent interested in innovation and developing niche technology in collaboration with DRDO.
Challenges
The distribution of the allocations in the defence budget 2024-25 are a pointer to the challenges which remain to be addressed. 53.4 % of the budget is spent on pay & allowances and pensions whereas only 42.4% of the budget is available for the operations & maintenance and capital expenditure of the armed forces. Whether this is adequate to meet the security challenges being faced by the nation is a question that continues to be raised. However, the issue is complex, as the Agnipath scheme, which was supposed to be the solution, has become a problem due to the differing viewpoints about it.
The global security scenario, especially the ongoing Russia-Ukraine conflict, has redefined the contours of warfare. The advent of pervasive surveillance and extended endurance has created a transparent battlefield. To keep pace with these challenges, homegrown solutions are needed. The domestic industry can play an important role in developing AI and cutting-edge technologies for precision systems, sensors, UAVs etc needed for future warfare. Some of these systems will be dual-use also. More incentives and concessions to the industry will be needed to build a vibrant defence industrial ecosystem