Union Finance Minister Nirmala Sitharaman, while presenting Union Budget 2023 on Wednesday, February 1, allocated nearly Rs 6 lakh crore to the defence sector, as per the notes on demand for grants. This includes a capital outlay of Rs 1.62 lakh crore, a 12 percent rise over last year's Rs 1.44 lakh crore.

The actual spending during 2021-2022 on defence capital outlay was Rs 1,37,987 crore. The Budget Estimate in 2022-23 for the same was Rs 1,52,369 crore and then the revised estimate the same year was Rs 1,50,000 crore. Now, the Budget Estimate for 2023-34 is Rs 1,62,600 crore.

Capital expenditure includes money spent on salaries of armed forces and civilians, pensions, modernisation of armed forces, production establishments, maintenance, and research and development organisations.

The allocation to the Ministry of Defence constitutes 8 percent of the total Union Budget. As per the data released by the Stockholm International Peace Research Institute (SIPRI) in 2021, India is the third-largest spender on military after the US and China.

Here's a look at the defence budget allocation trend in 5 years

According to an analysis by the PRS Legislative Research, India’s defence spending as a proportion of its total government expenditure has been decreasing over the years. Also, defence expenditure as a percentage of the gross domestic product (GDP) declined from 2.3 percent in 2012-13 to 2 percent in 2022-23.

"In the last decade (2012-13 to 2022-23), the budget of the Ministry of Defence has grown at an annual average rate of 8.6 percent, while total government expenditure has grown at 10.8 percent. During this period, defence expenditure as a proportion of central government expenditure decreased from 16.4 percent in 2012-13, to 13.3 percent in 2022-23," the analysis revealed.

Capital outlay

Capital outlay for defence includes expenditure on construction work, machinery, and equipment such as tanks, naval vessels, and aircraft.

Since 2012-13, the share of the defence budget spent on capital outlay has declined. "It was 29 percent in 2012-13 and declined to 24 percent in 2019-20. In 2020-21, the share of capital outlay in the defence budget increased to 27 percent. In 2022-23, it is again estimated to be 27 percent. Note that between 2012-13 and 2018-19, the average annual growth rate of capital outlay was 5 percent while between 2019-20 and 2022-23 it was 11 percent," the analysis revealed.

Is the Budget meeting the needs of the armed forces?

Since 2015-16, the funds allocated to the armed forces in the budget amounted to less than what was initially projected, the PRS analysis says.

"In 2021-22, while the projected funds needed for all the three forces were estimated at Rs 4,49,508 crore, the budget allocated a sum of Rs 3,24,658 crore (28 percent shortfall). The shortfall for revenue expenditure and capital expenditure was 19 percent and 38 percent, respectively," it said, sharing a chart to indicate the same.

(Credit: PRS)

Notably, the actual expenditure incurred by the Ministry of Defence has exceeded the budget since 2016-17.

Budget allocation of three armed forces

In 2022-23, the total allocation of the three forces (including pensions) was Rs 5,25,166 crore, which was 94 percent of the total defence budget of that year. Out of this, the allocation for the Army accounted for 58 percent of the defence budget, followed by the Air Force at 19 percent and the Navy at 16 percent.

The expenditure on Army, Navy, and Air Force is in the ratio 3.5:1:1.2. Excluding pensions, the expenditure of Army, Navy, and Air Force is in the ratio 2.5:1:1.1.

Defence production and procurement

The decline in production of defence equipment by the domestic industry as a percentage of funds available for capital outlay with the armed

services may increase the reliance of the armed forces on imports

In order to reduce imports and promote self-reliance, the Budget for 2022-23 proposed that 68 percent of the defence capital procurement budget be earmarked for the domestic industry. This has increased from 58 percent in 2021-22.

How earlier budget proposals are being implemented

The setting up of 100 new Sainik Schools, with NGOs/ private schools/states, was proposed in earlier budgets. "The Cabinet on 12.10.2021 approved the proposal for setting up of 100 new Sainik Schools in partnership with NGO/private schools/state owned schools on affiliation basis," the government said in a document.

The Ministry of Defence has initiated the process of seeking affiliation from the interested parties. "In this regard, a website has been started to seek expressions of interest from interested private/NGOs/state governments. As on 13.01.2022, 155 expression of interests have been received online," it said.

First Published:Feb 1, 2023 2:07 PM IST