Defence Budget: Allocation For Modernisation Up By Over 12 Per Cent, 25 Per Cent R&D Budget Set Aside For Private Sector

The government has allocated Rs 5.25 lakh crore for defence in 2022-23, a significant increase from last year's allocation of Rs 4.78 lakh crore.

At 1.52 lakh crore, the capital outlay used by the forces for modernisation has been increased by over 12 per cent this year. The capital outlay in the defence budget for the financal year 2021-22 was 1.35 lakh crore, while the revised estimate stands at 1.38 lakh crore.

For revenue expenditure, which includes the spending on payment of salaries and maintenance of establishments, an allocation of Rs 2.33 lakh crore has been made, which is a marginal increase of around 1.5 per cent over compared to last year's Rs 2.29 lakh crore.

To increase private sector participation in defence manufacturing and develop a robust defence-industrial complex in the country, the government has reserved 25 per cent of the defence research and development budget for start-ups and private entities.

"Allocation of 25 per cent of defence R&D budget for startups, academia and private industry is a much-needed reform. We thank the Ministry of Defence and the Ministry of Finance for this major boost to research and innovation," said SP Shukla, President of the Society of Indian Defence Manufacturing.

To give an impetus to the design and development of weapon systems in the country, the government has earmarked 68 per cent of the capital budget for procurement from the domestic industry, up from 58 per cent in 2021-22. The government will also set up a nodal agency for the industry's wide-ranging testing and certification requirements.

In her budget speech, the Finance Minister said the government was committed to reducing imports and promoting self-reliance.

"Private industry will be encouraged to take up design and development of military platforms and equipment in collaboration with DRDO and other organisations through SPV (special purpose vehicle) model," she said.

The Defence Ministry has welcomed the budget announcements.

"The 68 per cent of defence capital procurement budget has been allocated towards local procurement. It is in line with the 'Vocal for Local' push, and it will certainly boost the domestic defence industries," Defence Minister Rajnath Singh said, adding, "the proposal to reserve 25 per cent of the R&D Budget for startups and private entities is an excellent move.