The Indian defence Budget has experienced dynamic changes from 2020 to 2024, reflecting strategic recalibrations, geopolitical shifts, and economic challenges. This period has witnessed notable rise in spending, driven by modernisation needs, border tensions, and the push for self-reliance in defence manufacturing.
An expanding Budget
India’s defence Budget has shown a consistent upward trajectory over the past four years. In 2020, the Budget stood at Rs 4.71 trillion, rising to Rs 4.78 trillion in 2021, Rs 5.25 trillion in 2022, and Rs 5.94 trillion in 2023. The projected Budget for 2024 is expected to surpass Rs 6 trillion, highlighting India's commitment to bolstering its defence capabilities amid growing security challenges.
Key areas of increased spending
Modernisation and equipment acquisition
A significant focus has been on modernisation and equipment acquisition. The capital outlay for purchasing new equipment and technology saw a notable rise, from Rs 1.35 trillion in 2021 to Rs 1.52 trillion in 2022, and further to Rs 1.62 trillion in 2023. This investment aims to enhance India’s military prowess with advanced weaponry, aircraft, naval vessels, and improved cyber capabilities.
Modernisation efforts
The need to modernise outdated equipment and enhance combat readiness is critical, especially with ongoing border tensions with China and Pakistan. The “Make in India” initiative has also spurred investments in indigenous defence projects, promoting self-reliance and reducing dependency on foreign suppliers.
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Personnel costs and pensions
Personnel costs, including salaries, pensions, and other benefits, have seen substantial increases.
While defence pension was Rs 1.33 trillion in 2020-21, it declined to Rs 1.19 trillion in the 2021-22 Budget. Meanwhile, it rose to Rs 1.38 trillion in 2023.
This rise is primarily due to the implementation of the One Rank One Pension (OROP) scheme and regular salary increments, necessary to maintain the morale and operational effectiveness of the sizable Indian armed forces.
Areas with reduced spending
Defence research and development
In contrast to the increasing trend in other areas, the Budget for defence research and development (R&D) saw relative stagnation.
The Budget increased slightly from Rs 10,484 crore in 2021 to Rs 11,375 crore in 2022, but the growth rate lagged behind other Budget components. The emphasis on immediate procurement needs possibly overshadowed long-term investments in R&D. However, recent policy shifts indicate a renewed focus on fostering innovation and self-reliance in defence technology.
Maintenance and infrastructure
Spending on maintenance and infrastructure witnessed marginal growth compared to other sectors. This includes the maintenance of existing military bases, equipment, and facilities. Prioritising immediate acquisition needs and modernisation efforts may have resulted in relatively lower allocations for maintenance, a critical concern for the long-term sustainability of defence infrastructure.
Influencing factors
Geopolitical tensions
The border skirmishes with China, especially the Galwan Valley clash in 2020, significantly impacted defence spending priorities. The need to strengthen border defences and enhance rapid deployment capabilities has driven increased allocations.
Economic constraints
The economic impact of the Covid-19 pandemic influenced Budget decisions, necessitating careful allocation across various sectors. Despite economic constraints, defence spending remained a priority, reflecting the importance of national security.
Policy shifts
The “Atmanirbhar Bharat” initiative has been pivotal in shaping defence spending. The emphasis on domestic manufacturing and reducing reliance on foreign suppliers has resulted in increased investments in indigenous defence projects.