India’s Defence Budget gets a small hike

This piece is part of the essay series, Amrit Kaal 1.0: Budget 2023

---

India’s Finance Minister (FM) Nirmala Sitharaman yesterday presented to the Parliament India’s Union budget for 2023-24. The defence budget saw a hike from last year’s INR 5.25 lakh crore to INR 5.94 lakh crore. Out of this, INR 1.62 lakh crore has been allocated under the capital expenditure head whereas INR 2.70 lakh crore is earmarked for salaries and maintenance of defence establishments under the revenue head. The INR 1.62 lakh crore will be used for modernising the armed forces including procurement of new weapon platforms, warships, and fighter jets. The capital expenditure also has seen a small hike from 2022-23’s INR 1.50 lakh crore. The Indian Defence Minister Rajnath Singh commented that the “Non-Salary Revenue/ operational allocation gets a boost of INR 27,570 Crore, with the budgetary outlay under this segment augmented from INR 62,431 Crore in BE 2022-23 to INR 90,000 crore in BE 2023-24.” This is critical for the armed forces in addressing the important gaps in the combat power of the Indian military. The Ministry of Defence (MoD), in a press release, said that this comes against the backdrop of another increase to the Non-Salary Revenue head, following a mid-year review by the government. The mid-year increase of INR 26,000 crore is estimated to be around 42 percent of this year’s allocation. This increase, according to the MoD, “has ensured liquidation of the entire carry over liabilities during the current year thereby ensuring that there is no dent in the next year’s operational outlay of the Services.” Some of these funds are meant for “Training Aids & Simulators for Agniveers”.

The INR 1.62 lakh crore will be used for modernising the armed forces including procurement of new weapon platforms, warships, and fighter jets.

The budget has also rightly focused on the research and development and technological base in augmenting the capacities of the armed forces. This has led to an allocation of INR 23,264 crore to the Defence Research and Development Organisation (DRDO). Additionally, to step up technology development and to support the domestic defence industrial ecosystem, the iDEX and DTIS are earmarked with INR 116 crore and INR 45 crore respectively. This is a hike of 93 percent for iDEX and 95 percent for DTIS over 2022-23. Border infrastructure has also found worthy allocation in this year’s budget. Given the state of the relations between India and China and with a live conflict on the border, infrastructure development along the Sino-Indian border areas is key. Commenting on the budget emphasis on infrastructure development in the border areas in this year’s budget, the defence minister tweeted that the infrastructure development around the border areas, especially India’s northern borders is important and “the Capital Budget of Border Roads Organisation (BRO) has increased by 43 percent to INR 5,000 crore in FY 2023-24 as against INR 3,500 crore in FY 2022-23.” This will facilitate the upgradation of border infrastructure, especially the “strategically important assets like Sela Tunnel, Nechipu Tunnel & Sela-Chhabrela Tunnel and will also enhance border connectivity.” Increasing the capital expenditure allocation and the augmented border infrastructure funds are indicative of the government’s wariness about China. The capital expenditure increase is critical for filling the significant gaps that the Indian armed forces face. The Indian Navy, for instance, needs new fighter planes for its new aircraft carrier, the INS Vikrant. With the Indian Air Force already operating two squadrons of Rafale, there is a push to buy the marine version of the Rafale fighter, Rafale-M, for the Indian Navy, which will ease maintenance issues. The Navy’s submarine numbers are also lagging. Under Project 75I, there have been plans for the development of six new submarines but according to government sources who spoke to the media, the government has put in place a “back up plan” to acquire more Scorpene class submarines if the Project 75I contracting process is “stuck”.

Commenting on the budget emphasis on infrastructure development in the border areas in this year’s budget, the defence minister tweeted that the infrastructure development around the border areas.

The Indian Air Force also has an urgent requirement for additional fighter squadrons. The IAF’s combat squadron strength has gone well below what the IAF projects, and it is unlikely that the situation will get any better soon. The IAF wants 4.5 generation fighter jets in addition to indigenous aircrafts. Reportedly, there is a debate whether to push forward with MRFA (Multi-role Fighter Aircraft) or buy more of the French Rafale which the Air Force already has. Among the upcoming big payments are the payouts for the S-400 air defence systems and the Indian plans to upgrade “certain Sukhois to carry additional BrahMos missiles, besides purchase of other missiles and drone systems.” The Indian Army has its own list of demands, including its plans to acquire light tanks and artillery guns for better operational capabilities along the LAC, especially in Ladakh. Meanwhile, the demand for a multi-year non-lapsable fund for defence modernisation continues to remain a “work in progress”. The recommendation made by the Ministry of Defence is yet to be actioned by the Ministry of Finance. Given that the Indian economy is expected to grow at 6.1 percent in 2023 against a 6.8 percent in 2022, the defence ministry and services has to make do with what it has. Unless the Indian economy sustains a higher growth rate for several years, its ability to spend on critical sectors such as defence force modernisation and border infrastructure will remain stymied. At a time when India and China are locked in a border conflict, this does not bode well for the future.

• Indian Economy
• Indian Defence
• India
• Agniveers
• Amrit Kaal
• budget
• defence
• Economy
• infrastructure
• Nirmala Sitharaman

The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.