The government of India in its Interim budget presentation yesterday announced a total allocation of Rs 621,540 crores for defence with a substantial capital allocation of 172,000 crores for capital purchases and a sum of Rs 92,088 crores earmarked for non-salary revenue expenses which is essentially the money allotted for repairs, maintenance of base, acquisition of ammunition reserves, etc. Defense pensions and salaries remained high outflow heads with allocations of Rs 141,205 crores and 190,000 crores respectively while the ex-servicemen's welfare scheme has also gone up from Rs 5,431.56 crores to Rs 6,968 crores. The DRDO, Border Roads and Coast Guard have all also received modest boosts to their budgeted allocations. Above all, the most interesting item has to be the creation of a new corpus of Rs 100,000 crores for funding “deep tech”. This fund will be available to firms and individuals who can avail of a 50-year interest-free loan from the same to develop technology for the defense sector.

While the Budget allocation of Rs 6,21,540 crores may seem great given that it’s larger than the 2023-24 budget estimate of Rs 593534.64 crores it is pertinent to note that the revised estimate for FY 2023-24 is already at Rs 6,23,889 crores and we will in all likelihood see the revised budgetary allocations for FY 2024-25 rise above 6,50,000 crores on the same pattern. The interesting bit here though is that the Capital expense allocations have been budgeted at nearly Rs15000 crores higher than the previous year. The Ministry of Defence (MoD) readout released by PIB states that the increased funds have been budgeted to ensure a large number of big-ticket allocations in FY 2024-25 including the Super Sukhoi program and further upgradation of the MiG 29 UPG fighter aircraft with new engines.

The acquisition of additional LCA and Su30 aircraft is also planned in FY 2024-25 alongside payment for C295 aircraft which have already been ordered. The Indian Navy will be acquiring deck-based Rafale fighter aircraft and new Submarines while also paying for Survey vessels which were contracted some time ago. Apart from this the MoD for the first time has decided to club CAPEX allocations for similar items utilized by all three forces like Heavy & Medium vehicles, aircraft engines, etc. This will help to curb time spent in unnecessary duplication of processes.

Other major increases have happened in the heads for border infrastructure which has been allocated Rs 6500 Crores around 30% higher than the real spend estimated in FY 2023-24. This will go a long way towards building critical infrastructure to facilitate the movement of troops and equipment primarily towards the Tibet Border where multiple bridge, tunnel & road projects are under progress. As the Indian Army mechanizes and inducts heavier equipment like 155mm guns better infrastructure will help move these assets rapidly to the frontlines. The tunnels will help to hide and protect critical equipment from prying satellites.

The Revenue allocation of Rs 92,088 Crore also has a symbiotic relation with border infrastructure as revenue funds help in improving fixed defensive structures by establishing and bolstering bases. The border roads will help in moving equipment and men to surveil the structures created and strengthened. The MoD has specifically mentioned the development of the Nyoma Airfield in Ladakh, the Sinku La tunnel in Himachal Pradesh and the Nechiphu tunnel in Arunachal Pradesh. The increased allocation can help in the completion of these infrastructure projects.

The funds allocated to the Indian Coast Guard has increased by 6.5% to Rs 7651 Crores. It is pertinent to note here that nearly half of these funds will be dedicated for new acquisitions. The Coast Guard has in the last six months placed orders with MDL for one Training vessel, six new Offshore Patrol Vessels and 14 new Fast patrol vessels. An additional order for eight more fast patrol vessels has been signed with Goa Shipyard Limited, these increased allocations will be used to pay some of the costs for these existing orders and help in the modernisation of existing assets as well.

The DRDO has been granted a slight increase over 2023-24 with Rs 23,855 Crores coming into its kitty. This includes a sizeable allocation of Rs 13,208 Crores as CAPEX which will in all likelihood be utilized to upgrade existing facilities and build new planned facilities like the 132 Kn Engine Testbed at Gas Turbine Research Establishment (GTRE) and in setting up new facilities at Machilipatnam and Tandur. The increased CAPEX will help the DRDO fund and initiate new projects. Additionally, the budget has a new provision of Rs 100,000cr as a corpus towards helping the development of “Deep Tech”.

The Finance minister is on record stating that funds from this head will be made available to tech-savvy youth and firms at zero or very low interest for up to 50 years. While the Budget itself did not define Deep Tech, NATO defines nine technology priorities as Extreme Deep Tech with no distinction between emerging and disruptive. These are artificial intelligence (AI), data autonomy, quantum-enabled technologies, biotechnology, hypersonic technologies, space, novel materials and manufacturing, and energy and propulsion.

The Defence Budget for 2024-25 has been along the predictable lines of maintaining the policy of modest yearly increments while keeping total allocations below 15% of total government expenditure, a trend that has been in vogue since 2019. The Modi government has once again not fulfilled the recommendation of the standing committee on defense which in 2018 recommended the defense budget to be brought up to 3% of GDP to ensure adequate preparedness. The current allocation is 1.9% of the estimated GDP for FY 2023-24. If the government had fulfilled the 2018 defense funding recommendations it would have to budget an estimated Rs 9,06,876 Crores or $111.96 billion instead of the Rs 6,21,540 Crores or $75 billion budgeted presently.

In essence, the Govt is spending around 30% less on defense than what the Standing committee has recommended in 2018. Also, additional recommendations on a non-lapsable defense capex fund seem to have fallen by the wayside as well.

While the current policy of gradual increase is fiscally conservative ande gives the government much more leeway to spend on infrastructure development, a declared goal of a developed India or “Viksit Bharat”. But the government must focus on the development of the military as well. India is geographically located in a “rough neighbourhood” and sits astride an Ocean that multiple superpowers are seeking to dominate. India cannot put underplay the security concerns for the future while our adverse neighbours to the north grow stronger every year. If India wants to be recognised as a superpower and the “third pole” in its own right, it will have to loosen its purse strings sooner than later.

Image source: India TV News