Fighter jets to submarines: Budget 2024 aims at major defence acquisitions

In absolute terms, Budget 2024's allocation under the capital head to the armed forces stands at Rs 1.72 trillion, which is over nine per cent more than the FY24 Revised Allocation

The Ministry of Defence (MoD) has been allocated about Rs 6.22 trillion (approximately $75 billion), the highest among ministries, in the regular Union Budget of financial year 2024-25 (FY25), with a specific focus on filling "critical capability gaps" through "big-ticket acquisitions" in the current and subsequent financial years.

The FY25 defence allocation is down 0.31 per cent from the Revised Estimates for FY24, but is 4.79 per cent higher than the FY24 Budget Estimates.

The total allocation for the MoD stands at 1.9 per cent of gross domestic product (GDP) and amounts to approximately 13 per cent of the overall Budgetary Estimate.

 

"The allocation to MoD for FY25 is higher by approximately Rs 1 trillion (18.43 per cent) over the allocation for FY23 and 4.79 per cent more than the allocation of FY24," said an official release by the MoD.

A) Budget 2024: Military modernisation gets a boost

In absolute terms, the FY25 budgetary allocation under the capital head to the armed forces is Rs 1.72 trillion, which is 20.33 per cent higher than the actual expenditure of FY23 and 9.40 per cent more than the Revised Allocation of FY24.

However, out of the FY25 defence allocation, only 27.66 per cent goes to capital outlay, which caters for military modernisation; 14.82 per cent for revenue expenditure on sustenance and operational preparedness; 30.66 per cent for pay and allowances; 22.70 per cent for defence pensions; and 4.17 per cent for civil organisations under the MoD.

"The allocation (under the capital head) is aimed to fill the critical capability gaps through big-ticket acquisitions in current and subsequent FYs," said the official MoD release. "The enhanced budgetary allocation will fulfill the requirement of annual cash outgo on planned capital acquisitions aimed at equipping the armed forces with state-of-the-art niche technology, lethal weapons, fighter aircraft, ships, submarines, platforms, unmanned aerial vehicles, and specialist vehicles," it added.

The allocation is also aimed at promoting 'Aatmanirbharta' (self-reliance) in defence technology and manufacturing.

B) Budget 2024: Strengthening domestic defence capacity

The MoD has earmarked 75 per cent, amounting to Rs 1.05 trillion, of the modernisation budget for procurement through domestic industries during FY25. "This will have a multiplier effect on GDP, employment generation and capital formation, thus providing a stimulus to the economy," said the MoD release.

C) Budget 2024: Focus on defence start-ups, MSMEs and innovators

While maintaining the allocation made to the MoD during the Interim Budget, the government has made an additional allocation of Rs 400 crore for innovation in defence through the Acing Development of Innovative Technologies with iDEX (ADITI) scheme, said the MoD release.

Through this scheme, the MoD is engaging with start-ups, innovators, and micro, small and medium enterprises (MSMEs) to develop innovative and indigenous defence-technology solutions.

Under the scheme, a grant of up to 50 per cent of the product development budget, with an enhanced limit of a maximum of Rs 25 crore per applicant, will be awarded according to existing iDEX guidelines.

Overall, the government has increased the allocation on innovation in defence through iDEX from Rs 115 crore during FY24 to Rs 518 crore in FY25, which the MoD says will give start-ups, MSMEs, and innovators a boost in developing defence-technology solutions and invite young talent.

D) Budget 2024: Defence self-reliance through research & innovation

The budgetary allocation to the Defence Research and Development Organisation (DRDO) has been increased to Rs 23,855 crore in FY25, compared to Rs 23,263.89 crore in FY24, revealed the MoD release.

Out of this allocation, a major share of Rs 13,208 crore has been allocated for capital expenditure, which will "financially strengthen the DRDO in developing new technology", with a special focus on fundamental research and hand-holding of private parties through the development-cum-production partner model.

An allocation of Rs 60 crore has been made to the Technology Development Fund (TDF) scheme, which is specifically designed for new start-ups, MSMEs and academia. It is meant to attract young talent interested in innovation and developing niche technology in collaboration with DRDO.