Amid Border Tension, Defence Allocation Touches 13.18 per cent of Total Outlay of Union Budget 2023-24

By Sri Krishna


New Delhi: With tensions continuing along the Line of Actual Control (LAC) and the Line of Control (LOC) with China and Pakistan, the Union Finance Minister Nirmala Sitharaman gave the armed forces a much needed shot in the arm when she announced that 13.18 per cent of the outlay of Union Budget 2023-24 would be for the defence forces. This Budget has also sustained the thrust on Modernisation and Infrastructure Development of the Defence Services, by continuing an upward trend in Capital Outlay.

Of the total outlay of Rs 45,03,097 crore for the Union Budget,  Defence gets Rs 5, 93,537.64  crore in Budget 2023-24, which is a jump of 13% over previous year which was an unprecedented jump for the operational allocation of the Armed Forces. Of this, Rs 1,38,205 crore is for Defence pension. With the government committed to providing the armed forces with the best possible equipment to guard its land and sea borders, the Capital outlay pertaining to modernisation and  infrastructure development increased to Rs 1.62 lakh crore which was a 57% rise since 2019-20.

With the construction of border roads being another focus area of the government, Capital Budget of Border Roads Organisation (BRO) was enhanced by 43% to Rs 5,000 crore from Rs 3,500 crore in FY 2022-23.

The year had seen construction of critical border roads specially in the North East along the Sino-Indian border to counter the rapid infrastructure build up by China on the other side and increasing its manpower strength.

Meanwhile, with the government focussing on Atmanirbhar in defence sector, the budgetary allocation for Defence Research and Development Organisation (DRDO) has been increased by Nine Per Cent to  Rs 23,264 crore.  This was also part of the government’s ambitious target of $5 trillion of defence exports. With the Government bringing out three lists of items which are not to be imported in the defence sector, the boost for arms manufacturing is aimed at encouraging Atmanirbhar in the indigenous defence industry.

Another project which got a massive 93 per cent increase touching Rs 116 crore was  iDEX which is to foster innovation. The government’s ambitious Agniveer project launched this year of having armed forces with a young look, the Finance Minister announced that the Agniveer Fund would be given Exempt-Exempt-Exempt (EEE) status.

With a view to ensuring that the Armed Forces are ready to meet any eventuality in view of the prevailing situation along the borders, Non-Salary revenue outlay has been enhanced significantly from Rs 62,431 crore in Budget Estimates (BE) 2022-23 to Rs 90,000 crore in BE 2023-24, representing a 44% jump. This expenditure is expected to close critical gaps in the combat capabilities and equip the Forces in terms of ammunition, sustenance of weapons and assets, military reserves. This will cater to sustenance of Weapon Systems, Platforms including Ships and Aircraft  and their logistics; boost fleet serviceability; emergency procurement of critical ammunition and spares; procuring and hiring of niche capabilities to mitigate capability gaps wherever required; progress stocking of military reserves, strengthening forward defences, amongst others.

The Finance Minister announced a National Data Governance Policy to unleash innovation and research by start-ups and academia. This will enable access to anonymized data which will further boost the Defence Start-ups and iDEX scheme. The Union Budget 2023-24 has also announced that the revamped Credit Guarantee scheme for MSMEs which will take effect from 1st April 2023 through infusion of Rs. 9,000 Crore in the corpus. This will enable additional collateral-free guaranteed credit of Rs 2 lakh crore. Further, the cost of the credit has also been reduced by about 1 per cent. This scheme will give a further fillip to the MSMEs associated with the Defence Sector.

As part of its move to improve the condition of veterans, the Defence Pension Budget registers a notable jump of 15.5 % in FY 2023-24. In absolute terms, this amount is Rs 1,38, 205 Crore in BE 2023-24 against Rs 1,19,696 crore in BE 2022-23. Further, RE 2022-23 allocations at Rs 1,53,415 crore records a significant jump of 28%, amounting to Rs 33, 718 crores. This includes an amount of Rs 28,138 Crore to meet the requirement on account of revision of Armed Forces Pensioners/ Family Pensioners under One Rank One Pension (OROP).

To provide better Healthcare facilities to Veterans, Defence Budget 2023-24 registers a notable increase of 52% in the allotment for Ex-Servicemen Contributory Health Scheme (ECHS) with BE allocation of Rs. 5431.56 Crore in FY 2023-24 against Rs. 3582.51 Crore in FY 2022-23. This enhancement will ensure ‘Cashless Health Services’ and improved ‘Service Delivery’ to veterans and their dependents across India.

Appreciating the Budget, Defence Minister Rajnath Singh through a series of tweets, congratulated Finance Minister for presenting a growth-oriented Union Budget for FY 2023-24.

The Defence Budget was welcomed by the defence sector. Commenting on the defence budget, Ashish Saraf, VP and Country Director, India-Thales said, “We welcome the Government’s inclusive and growth-oriented budget and applaud the commitment towards strengthening defence sector in India. We believe that the increase in outlay will enable more local collaborations, critical technology development and transfers as well as development of skills in the country. This will further support the government’s objective of developing India as a global manufacturing hub to aid defence exports, and the vision of ‘Atmanirbhar Bharat’.”

Expressing his satisfaction on the budget, Baba Kalyani, Chairman and Managing Director, Bharat Forge Ltd said, “Government policy formulation is a consultative process and the successive budgets including today’s is a strong reflection of this process, aimed at promoting a virtuous cycle of growth and employment. Significant and sustained push on Infrastructure spend, Railways, Green Technologies and Defence is a welcome measure. Overall direction to take India on the trajectory of a technology-driven and knowledge-based economy coupled with productive capital investments will have long-standing benefits in driving inclusive financial growth and enhancing per-capita income levels.”

Gaurav Mehndiratta, Partner and Head, Aerospace and Defence, KPMG in India said that the defence budget increased by 13% to Rs 5.94 lakh crore. Capex for defence gets a nominal increase of 7% vs 33% increase in the nation’s overall capital expenditure commitment. We believe Capex allocation misses a commensurate reflection of the government’s impetus on defence manufacturing.

Captain Nikunj Parashar, Founder and MD of Sagar Defence Engineering said  “Entrepreneurship is critical for a country’s economic progress, as our Finance Minister Nirmala Sitharaman stated. It is exemplary to see that the Union Budget included start-up-friendly initiatives to give a contingency to start up to recover their losses and focus more on enhancing technological advancement of their innovations, research, and development.”

“By announcing the construction of fifty new airports, heliports, water aerodromes, and sophisticated landing strips to improve regional air connectivity, we have received a significant boost in our efforts to innovate further in the field of Urban Air Mobility and create efficient solutions such as Varuna,” Capt Parashar said.

Terming the budget as growth oriented and supportive to start-ups, Agnishwar Jayaprakash, Founder and CEO, Garuda Aerospace commented, “The Union Budget announced will certainly prove to be beneficial. Finance Minister Nirmala Sitharaman’s announcement has highlighted many points for the scope and development of the start-up economy. Garuda Aerospace’s virtual skilling and training universities will aim to empower 1 lakh youth by providing them with training and skilling for becoming drone pilots. Alongside this, Garuda will also provide them with job opportunities. Machine Learning and Artificial Intelligence used in drones will help in monitoring soil and crop yield.”

He further added, “DGCA-approved Garuda Kisan Drones will provide data that will help farmers enhance their crop production. Garuda’s Seed dropping drones are already helping the government plant seeds, rejuvenate the forest. Till date, they have planted 75,000 seeds. These drones will further support the government’s Misti scheme. The UBI-approved Kisan loan will help the agriculture accelerator fund and encourage agritech start-ups by helping young entrepreneurs in rural areas by distributing various agrochemicals thus further scaling it. Garuda drones will help government labs develop 5G enabled applications. Last year’s budget helped Kisan Drone Loans and subsidies and it set up a platform for India to become a Global Drone Hub by 2030. This transformation will be centred around precision Made in India drones in the Agri Sector with helping the youth. The agritech start-ups will be funded. With this, farmers will be able to get subsidies and ensure Affordable precision agri technology is contributing towards enhancing food crop production and increasing yield which will directly contribute to increasing India’s GDP.”