The defence budget was on Tuesday increased to Rs 5.25 lakh crore for 2022-23 in a modest hike from last year's allocation of Rs 4.78 lakh crore with a major push on procurement of military hardware from domestic industry to cut imports amid the lingering border standoff in eastern Ladakh.
Presenting the Union Budget in Parliament, Finance Minister Nirmala Sitharaman said 68 per cent of the capital defence procurement outlay will be set aside for domestic industry and that 25 per cent of the allocation for defence research and development will be for the private sector, academia and startups.
In another announcement, she said an independent nodal umbrella body will be set up for private players to meet their requirement for testing and new technologies and to get certification and indicated the government's resolve to develop remote villages along the northern borders.
The defence budget of 5,25,166 crore including Rs 1,19,696 crore for defence pensions is an increase of 9.8 per cent compared to last year's total budgetary outlay.
The overall allocation comes to around 2 per cent of the projected GDP for 2022-23. The defence budget excluding the pension component stands at Rs 4,05,470 crore.
In the defence budget, Sitharaman allocated Rs 1,52,369 crore for capital expenditure that includes purchasing new weapons, aircraft, warships and other military hardware.
Laxman Kumar Behera, associate professor at Special Centre for National Security Studies at the Jawaharlal Nehru University, said the increase in the allocation has been 'significant' considering the impact of the coronavirus pandemic on the Indian economy.
The capital outlay is an increase of around 10 per cent compared to the revised estimate of Rs 1,38,850 crore for 2021-22. The figure at the budget estimate stage was Rs 1,35,060 crore.
According to the budget documents, an allocation of Rs 2,33,000 crore has been made for revenue expenditure that includes expenses on payment of salaries and maintenance of establishments.
Separately, Rs 20,100 crore has been set aside for the ministry of defence (civil).
Under the capital outlay, the Army has been given Rs 32,015 crore as against Rs 36,481 crore in the budget last year. According to the budget documents, the Army could spend only Rs 25,377 crore out of the allocation.
Asked whether the capital outlay was adequate considering the eastern Ladakh border row and the way China has been ramping up military might, Behera referred to the Army failing to spend the capital allocation made to it in last year's budget.
"It is not about the allocation...They (the Army) have to do some serious thinking on how to speed up procurement," he said.
The Indian Navy has been given an allocation of Rs 47,590 crore under capital outlay as against last year's budgetary outlay of Rs 33,253 crore.
According to revised estimate for 2021-22, the Navy spent Rs 46,021 crore as against the allocation of Rs 33,253 crore.
The Indian Air Force has been allocated a total of Rs 55,586 crore as the capital outlay as against last year's Rs 53,214 crore.
According to the budget documents, the IAF could spend Rs 51,830 crore out of the allocation.
In her budget speech, Sitharaman said the government is committed to reducing imports and promoting self-reliance in procuring equipment for the armed forces.
"Sixty-eight per cent of the capital procurement budget will be earmarked for the domestic industry in 2022-23, up from 58 per cent in 2021-22," she said.
The finance minister said defence research and development will be opened up for industry, startups and academia with 25 per cent of the defence R&D budget earmarked for it.
"Private industry will be encouraged to take up design and development of military platforms and equipment in collaboration with DRDO and other organisations through special purpose vehicle model," she said.
Defence Minister Rajnath Singh described as an "excellent move" the proposal to set aside 25 per cent of the defence R&D budget for startups and private entities in the financial year 2022-23.
Singh also welcomed Sitharaman's announcement that 68 per cent of the defence capital procurement budget would be allocated towards procurement from domestic industry.
"The 68 per cent of defence capital procurement budget has been allocated towards local procurement. It is in line with the 'Vocal for Local' push and it will certainly boost the domestic defence industries," Singh tweeted.
SP Shukla, president of the Society of Indian Defence Manufacturers, welcomed the announcement of setting aside 68 per cent of capital outlay for domestic industries, saying it will sustain investments and attract fresh capacity creation.
"Creation of a nodal body for setting up testing and certification requirements of defence systems and platforms will help the domestic industry through faster processes and cost-efficiency," he said.
Shukla said the allocation of 25 per cent of the defence R&D budget for startups, academia and private industry is a much-needed reform.
The capital budget of the Border Roads Organisation has been increased to Rs 3,500 crore from Rs 2,500 crore in 2021-22.
The defence ministry said it will expedite the progress of the creation of border infrastructure including important tunnels and bridges.
It said the increase in the overall capital budget reflects the government's resolve towards sustainable enhancement in the modernisation and infrastructure development and also towards achieving the objectives of 'Aatmanirbhar Bharat.'
To boost coastal security, the capital budget of the Indian Coast Guard has been enhanced to Rs 4,246 crore from Rs 2,650 crore in 2021-22.
"This enhancement is aimed at building up of assets such as the acquisition of ships & aircraft, augmentation of infrastructure, the establishment of coastal security network and building up technical and administrative support structures," the ministry said.
