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Defence procurement gets Budget boost, Modi govt hikes capital outlay to Rs 1.52 lakh crore

Overall defence budget for 2022-23 stands at Rs 5.25 lakh crore, up from Rs 4.78 lakh crore in 2021-22. Defence budget is 13.3% of total expenditure planned by Centre for 2022-23.

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New Delhi: In a major fillip to the defence sector, Finance Minister Nirmala Sitharaman Tuesday increased the capital outlay for procurement of new equipment by the defence ministry to Rs 1.52 lakh crore, from the revised estimates of Rs 1.38 lakh crore for the current fiscal.

The overall defence budget, including pensions, stood at Rs 5.25 lakh crore, up from Rs 4.78 lakh crore in the 2021-22 financial year. The new defence budget is 13.3 per cent of the total expenditure planned by the Narendra Modi government for the financial year 2022-23. It is also about 2.03 per cent of India’s nominal GDP (pegged at Rs 258 lakh crore) for the 2022-23 fiscal.

Presenting the Union Budget in Parliament, Sitharaman also made a massive push for domestic defence equipment manufacturers, by earmarking 68 per cent of the capital budget for them, while reserving 25 per cent of research and development funds for private companies, start-ups and academia.

“Our government is committed to reducing imports and promoting ‘atmanirbharta‘ (self-reliance) in equipment for the armed forces. Sixty-eight per cent of the capital procurement budget will be earmarked for domestic industry in 2022-23, up from 58 per cent in 2021-22,” she said.

This figure of 58 per cent had been the target in 2020-21, while in the Budget for the 2021-22 financial year, 64 per cent of the capital budget was reserved for the domestic industry.

The finance minister said defence research and development (R&D) will be opened up for industry, start-ups and academia, with 25 per cent of defence R&D budget earmarked for them.

“Private industry will be encouraged to take up design and development of military platforms and equipment in collaboration with DRDO and other organisations through SPV (Special Purpose Vehicle) model,” she said.

In another pro-industry step, Sitharaman also announced the creation of an independent nodal umbrella body for meeting wide-ranging testing and certification requirements.

‘76% enhancement over 9 years’

Defence Minister Rajnath Singh welcomed the Budget, saying “it is in line with the ‘Vocal for Local’ push and it will certainly boost the domestic defence industries”.

The defence ministry in a statement said the total allocation under capital outlay of the defence services has been increased to 1.52 lakh crore in 2022-23 from Rs 86,740 crore in 2013-14.

That is an enhancement of 76 per cent over a period of nine years, it said, adding that during this period, the total defence budget, including defence pensions, has increased by 107.29 per cent to Rs 5.25 lakh crore in 2022-23 from Rs 2.53 lakh crore in 2013-14.

“In the Budget 2022-23, the capital allocations pertaining to modernisation and infrastructure development of armed forces has been significantly increased to Rs 1.52 lakh crore. This represents an increase of Rs 17,308 crore (12.82 per cent) from that earmarked for the 2021-22 financial year. Further, cumulative increase in the capital budget since 2019-20 has been Rs 48,975 crore (47.37 per cent),” it said.

Touching upon the finer details of the Budget, the defence ministry said the share of domestic capital procurement, which was earmarked at 64 per cent in 2021-22, has been enhanced to 68 per cent of the capital acquisition budget of the defence services (Rs 1.24 lakh crore) for FY 2022-23, which would be Rs 84,598 crore.

Capital segment of the defence ministry’s civil budget, catering to organisations such as Indian Coast Guard (ICG), Border Roads Organisation (BRO) and Directorate General Defence Estates (DGDE) among others, has also seen a notable jump of 55.6 per cent. In absolute terms, this amount is Rs 8,050 crore for the 2022-23 financial year, against Rs 5,173 crore in the 2021-22 fiscal.

Armed forces, manufacturing industry welcome budget

The armed forces too welcomed the increased capital outlay and pointed out that contrary to the budgetary estimates for last year, which stood at Rs 1.35 lakh crore, the forces had got an additional Rs 3,000 crore to meet their expenses, largely driven by the Navy.

The Indian defence manufacturing industry also expressed its satisfaction. In a statement, president of the Society of Indian Defence Manufacturers (SIDM), S.P. Shukla, said the Budget will sustain investments and attract fresh capacity creation.

(Edited by Poulomi Banerjee)

Also read: No changes in tax slabs, deductions — FM Sitharaman gives middle class a skip in Budget 2022



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