Interim Union Budget 2024 – 25: Key announcements for the Indian Defence Sector

 By Dr Shushant VC Parashar
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Key Defence Announcement in the Interim Union Budget 2024-25

The budget has allocated ₹ 621,540 crores to the Ministry of Defence, which was the highest amongst all the ministries and has amounted to approximately 13 per cent of the total budget[1]. The Government of India has prioritised the need to modernise the Indian Armed Forces, which can be seen as an increase in capital expenditure compared to the 2023-24 budget[2]. Revenue expenditures have seen a rise compared to the 2023-24 budget, which indicates a nominal increase in the allocation for stores, spares, repairs, and other services[3].

Budgetary allocation towards the expenditure of capital for the year 2024-25 is ₹ 172,000 crores. In 2023-24, the Budgetary Estimate (BE) was ₹ 162,600 crores while the Revised Estimates (RE) was ₹ 157,228. The budget allocated is 5.78 per cent higher than 2023-24 (BE). The BE for 2024-25 has decreased by -0.38 per cent compared to 2023-24 (RE)[4].

With the current government focusing on self-reliance and “Aatmanirbharta, ” the government has allocated ₹ 40,778 crores for co-developing and indigenous manufacturing of aircraft and aero-engines. Simultaneously, the “Agnipath Scheme” has seen an increase in outlay of ₹ 1.713 crores compared to other budgets[5].

The budgetary allocation to the DRDO has been increased to ₹ 23,885 crore in the Fiscal Year (FY) 2024-25 from ₹ 23,263.89 crore in FY 2023-24. Out of this allocation, a significant share of ₹ 13,208 crore was allocated for capital expenditure, thus financially strengthening the DRDO and enabling it to develop new technology and provide a roadmap for private parties during the development-cum-production partnership process. The Technology Development Fund (TDF) was allocated ₹ 60 crores (in FY 2022-23, capital allocated to TDF was ₹ 50 crores[6]) to increase the number of new defence start-ups, MSMEs and academia to attract the best and the bright in the field[7].

The Government of India aims to introduce a scheme to fortify deep-tech technologies, such as Artificial Intelligence (AI), Life Sciences, Aerospace, Chemistry, Industry, and Clean Energy, for the Indian Armed Forces, signalling a commitment to increasing self-reliance in the defence sector[8].

The budget for Defence pensions is ₹ 1,41,205 crores, 2.17 per cent higher than the previous year. It will cover monthly pensions for 32 lakh pensioners through SPARSH and other authorities. The Ex-Servicemen Welfare Scheme allocation for 2024-25 is up 28 per cent from the previous year, and there was a 70 per cent increase in the budget for ECHS during the current year to cover COVID-related expenses and bring rates on par with CGHS[9][10].

The government has allocated ₹  6,500 crores to the Border Roads Organisation for the financial year 2024-25. This is 30 per cent higher than FY 23-24 and 160 per cent higher than FY 2021-22, indicating the government’s commitment to improving border infrastructure. The funding will promote strategic infrastructure development in the border areas, boost socio-economic development, and promote tourism. Projects include the development of Nyoma Airfield, bridge connectivity to the southernmost Panchayat of India, and strategic tunnels in Himachal Pradesh and Arunachal Pradesh[11].

Endnotes

[1] Peri, D. (2024). 2024 Interim Budget | Government to consolidate the demand of three Services in defence allocation. The Hindu. Accessed from:https://www.thehindu.com/business/budget/govt-combines-procurement-demand-of-three-services-in-defence-budget/article67801055.ece. Accessed on: 02/02/2024.

[2] PIB. (2024). Record over Rs 6.21 lakh crore allocation to Ministry of Defence in Interim Union Budget 2024-25; 4.72% more than FY 2023-24. PIB. Accessed from: https://pib.gov.in/PressReleaseIframePage.aspx?PRID=2001375. Accessed on; 02/02/2024.

[3] The Economic Times. (2023). Budget 2023-24: Where is the govt spending more, and why? The Economic Times. Accessed from: https://economictimes.indiatimes.com/news/economy/policy/budget-2023-24-where-is-the-govt-spending-more-and-why/articleshow/97519490.cms?from=mdr. Accessed on:02/02/2024.

[4] Peri, D. (2024). 2024 Interim Budget | Government to consolidate the demand of three Services in defence allocation. The Hindu. Accessed from:https://www.thehindu.com/business/budget/govt-combines-procurement-demand-of-three-services-in-defence-budget/article67801055.ece. Accessed on: 02/02/2024.

[5] EY. (2024). Interim Budget 2024. Ernst and Young LLP. Accessed on: 02/02/2024.

[6] Khare, A. (2023). Technology Development Fund: Opportunities and Challenges. Manohar Parrikar Institute for Defence Studies and Analyses. Accessed from: https://idsa.in/issuebrief/technology-development-fund-akhare-031123. Accessed on: 02/02/2024.

[7] PIB. (2024). Record over Rs 6.21 lakh crore allocation to Ministry of Defence in Interim Union Budget 2024-25; 4.72% more than FY 2023-24. PIB. Accessed from: https://pib.gov.in/PressReleaseIframePage.aspx?PRID=2001375. Accessed on; 02/02/2024.

[8] Deva, P. (2024). Budget 2024 Key Highlights: Income tax, infra, railways, EVs and more – 15 key takeaways from FM Sitharaman’s speech. Mint. Accessed from: https://www.livemint.com/economy/budget-2024-key-highlights-from-income-tax-to-green-energy-and-tourism-lets-take-a-look-at-the-14-key-points-11706765681802.html#:~:text=A%20new%20scheme%20will%20be,IT%20industry%20and%20sunrise%20sectors. Accessed on: 01/02/2024.

[9] PIB. (2024). Record over Rs 6.21 lakh crore allocation to Ministry of Defence in Interim Union Budget 2024-25; 4.72% more than FY 2023-24. PIB. Accessed from: https://pib.gov.in/PressReleaseIframePage.aspx?PRID=2001375. Accessed on; 02/02/2024.

[10] Singh, B. D. (2024). Budget 2024: Defence Budget sees outlay of ₹6,21,540.85 crore. BusinessLine. Accessed from: https://www.thehindubusinessline.com/economy/budget/defence-budget-sees-outlay-of-62154085-crore/article67801414.ece. Accessed on: 01/02/2024.

[11] Siddiqui, H. (2024). Empowering India’s defence: Unveiling the FY 2024-25 budget. Financial Express. Accessed from: https://www.financialexpress.com/budget/empowering-indias-defence-unveiling-the-fy-2024-25-budget-3381870/. Accessed on: 02/02/2024.