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India earmarks 75% of defence capital budget for domestic firms

Armed forces will have to prioritise Indian entities when placing orders for procurement. Move will strengthen security grid & bolster economy, said defence minister Rajnath Singh.

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Bengaluru: In a boost to the fledgling Indian defence ecosystem, the government has earmarked 75 per cent of the armed forces’ capital procurement budget for domestic industry, up from 68 per cent earmarked for the same in the financial year (FY) 2022-23.

This means the armed forces will have to prioritise Indian entities or joint ventures based in India when placing orders for procurement. The 75 per cent would translate to approximately Rs 1 lakh crore in FY 2023-24, defence minister Rajnath Singh announced at the ongoing biennial aviation exhibition, Aero India, in Bengaluru.

As ThePrint reported earlier, India’s defence budget climbed to Rs 5.93 lakh crore for FY 2023-24 — an increase of 12.95 per cent compared to last year’s allocation of Rs 5.25 lakh crore — with pensions accounting for a whopping Rs 1.38 lakh crore and salaries of uniformed personnel and civilians amounting to approximately Rs 1.54 lakh crore.

The capital budget, which caters to the armed forces’ modernisation needs like purchase of new equipment and firepower, saw a modest increase of 6.57 per cent (Rs 10,000 crore), and now stands at Rs 1.62 lakh crore for FY 2023-24 as against Rs 1.52 lakh crore in FY 2022-23.

Sources in the defence industry welcomed the move to reserve 75 per cent of the capital budget for Indian companies at a time when the three services — Army, Navy and Air Force – are in the midst of a modernisation drive.

Moreover, industry sources highlighted that Indian firms or joint ventures based in India bagged all big contracts inked over the last few years, including for new fighters, helicopters, artillery gun systems and even unmanned aerial vehicles.

The way forward, they said, is for foreign Original Equipment Manufacturers (OEM) to set up shop in India to manufacture not just for the country but also for the world.

“India is no more interested in just buying systems off the shelf. It would be done only in cases of extreme urgency. Otherwise, it is about manufacturing India and then co-developing with India,” said one industry source.

In his speech at Aero India, the Raksha Mantri said the move will ensure the minimisation of import dependency. He was of the view that besides strengthening the country’s security grid, a strong and self-reliant defence industry will also bolster the economy.

Aero India also witnessed the forging of 266 partnerships including 201 MoUs (Memorandums of Understanding), 53 major announcements, nine product launches and three Technology Transfers (TTs) worth around Rs 80,000 crore, the defence ministry said in a statement.

(Edited by Amrtansh Arora)

Also Read: US companies trying to woo IAF, but here’s why it’s never inducted an American fighter


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