Ms Shobhana Joshi, Co-Chair SAMDeS
The budgetary allocation to Defence for 2024-25 is Rs. 6.21 lakh crores which is a hike of 4.72 % over last year’s allocation of Rs. 5.94 lakh crores. The grant-wise share of allocations is as follows; 27.67% for capital outlay on Defence Services, 45.49% for revenue expenditure on sustenance and operational preparedness including pay and allowances 22.72 % for defence pensions and 4.11% for MoD (Civil). Grant-wise details are given below:
BE 2024-25 Revenue Capital Total (Rs. in crore)
19. Ministry of Defence (Civil) 1,53,22.33 10,240.85 2,55,63.18
20. Defence Services (Revenue) 2,82,772.67 2,82,772.67
21. Capital Outlay on Defence Services 1,72,000.00 1,72,000.00
22. Defence Pensions 1,41,205.00 1,41,205.00
4,393,00.00 1,82,240.85 6,21,540.85
Highlights
Allocation for Defence Services
The allocation for the Defence Services and the Revenue Capital breakup for BE and RE 2023-24 and BE 2024-25 is as follows:
Revenue Capital Total (Rs. in crore)
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
Capital Outlay for Defence Services
The Capital Outlay for the Defence Services has got a step up of Rs. 10,000 crores, from a BE 2023-24 of Rs. 1,62,600 crores to Rs.1,72,000 crores. The RE 2023-24 however, was Rs.1,57,228 crore. In percentage terms the allocation for capital expenditure is 6.17 % higher than the BE 23-24 and 9.40 % more than the RE 23-24. According to the Ministry of Defence press release the allocation is in line with the Long-Term Integrated Perspective Plan (LTIPP) of the three Services aimed to fill the critical capability gaps through modernisation of the Armed Forces by materialising some big-ticket acquisitions in FY 2024-25. The enhanced budgetary allocation will facilitate equipping the Armed Forces with state-of-the-art, niche technology lethal weapons, Fighter Aircraft, Ships, Platforms, Unmanned Aerial Vehicles, Drones, Specialist Vehicles etc.
Consolidation of Capital allocation of three services
The interim budget has not allocated the capital outlay separately for each service. MoD has in a statement highlighted that from this year onwards, the Government of India has taken 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 Aeroengines, Heavy and Medium Vehicles etc. This will bring flexibility in financial management by enabling the MoD to reappropriate the fund among the three services keeping in view the inter-services priority. This mechanism will also expedite decision-making and ensure better utilisation of the capital budget. However, as each service has a different equipment profile and the Air Force and Navy are more capital-intensive than the Army this consolidation of allocations should not lead to an imbalance amongst the services.
Rs 6,500 crore has been earmarked to strengthen border infrastructure and Rs 7,651.80 crore allocated to Indian Coast Guard.
For veterans, the allocation towards the ECHS for FY 2024-25 is 28 per cent higher than the allocation for FY 23-24, having been raised from Rs 5,431 crore to Rs 6,968 crore.
Technology Development – Assistance for prototype development under Make procedure
The allocations under assistance for prototype development under Make procedure brings out that the utilisation of funds has been very low. In fact, for projects of the army the allocation for BE 2024-25 has been reduced to a meagre Rs. 10 crores from Rs. 100 crores in BE 2023-24.
BE 2023-24 RE 2023-24 BE 2024-25 (Rs in crore)
Projects of the Army 100.00 1.00 10.00
Projects of the Air Force 1131.62 388.89 1697.48
Total-Technology Development 1231.62 389.89 1707.48
Investment in Public Enterprises
The nine Defence Public sector undertakings under MoD have been provided a budget support of Rs. 2780.91 crore in BE 2024-25. The seven corporatized ordnance factories have been allocated Rs. 1494.00 crore in BE 2024-25.
Defence Research and Development Organisation (DRDO)
The increase in budgetary allocation to the Defence Research and Development Organisation (DRDO) has been marginal from Rs 23,263.89 crore in BE 2023-24 to Rs 23,855 crore in BE 2024-25. Of this, the allocation under the capital head was increased from Rs 12850.00 crore (BE 2023-24) to Rs 13208.00 crore (BE 2024-25) and under Revenue from Rs 10413.89 (BE 2023-24) crore to Rs 10647.61 crore (BE 2024-25).
According to the MoD press release the announcement regarding a Rs one lakh crore corpus for Deep Tech for long-term loan to tech-savvy youth/companies and the tax advantage to the start-ups will give further impetus to innovation in the defence sector.
Conclusion
The defence budget is a paradox. While the MoD continues to get the highest allocation amongst the Ministries, this year’s allocation is 13% of Central Government expenditure and about 1.89% of the projected GDP for FY 2023-24, most analysts still observe that the allocations are modest in the light of increased security challenges in the Red Sea, North East and the Western borders and compared with other large economies and global powers. Assuming the role of the net security provider comes with responsibilities and in turn costs of deployment, costs of presence and costs in support of friendly foreign countries. Budgetary support has clear limitations and cannot be stretched and therefore, there is a need to explore new avenues to fund defence with innovative financial models.