Budget 2024: Defence Budget 2024: Govt reduces Indian armed forces budget to Rs 4.56 lakh cr from Rs 6.21 lakh crore in just 5 months

Finance Minister Nirmala Sitharaman begins presentation of her 7th Union Budget in Lok Sabha. ” In her budget speech, Finance Minister Nirmala Sitharaman allocated Rs 4.56 lakh crore towards defence expenditure for FY25, significantly lower than Rs 6.21 lakh crore announced by her in the Interim Budget. She began her addressed by saying, “The people of India have reposed their faith in the govt led by PM Modi and re-elected it for the historic third term.She also went on to say, “India’s economic growth continues to be the shining exception and will remain so in years ahead. India’s inflation continues to be low and stable moving towards the 4% target…”

The key focus of the budget is on employment and the middle class, Finance Minister Nirmala Sitharaman said. The government will allocate 2 trillion rupees ($24 billion) for job creation over the next five years, Sitharaman said.

Sitharaman in February announced that allocation towards the defence sector for FY24 was revised from Rs 5.94 lakh crore to Rs 6.24 lakh crore. Interim allocation of Rs 6.22 lakh crore for FY25, while 0.4 per cent lower than FY24 RE, was still the highest among other ministries, and accounted for close to 13 per cent of the overall budgeted expenditure of the Central government. However, this allocation is still below 2% of India’s GDP. Capital expenditure, crucial for acquiring new equipment and technology, has been set at Rs 1.72 trillion, which constitutes 27.67% of the total defence budget.

Around 28 per cent of the overall defence allocation, or Rs 1.72 lakh crore, was towards capital acquisition as per Interim Budget announcement. Further, the budget for the Armed Forces’ revenue expenditure (excluding salaries) was Rs 92,088 crore, defence pensions at Rs 1.41 lakh crore. Additionally, Rs 6,500 crore
was set aside for strengthening border infrastructure, Rs 7,651.80 crore for the Indian Coast Guard, and Rs 23,855 crore for the DRDO.

India’s annual defence production reached a record high of approximately Rs 1.27 lakh crore for 2023-24, surpassing previous milestones set by the Make in India programme. In comparison, the value of defence production for FY23 was Rs 1.09 lakh crore.

India, among the largest importers of arms globally, has been on an indigenisation drive in recent decades. The Defence Ministry announced that over 12,300 items have been indigenized in the past three years, reflecting efforts to strengthen domestic defence industries.

Estimates project that the Indian armed forces will spend approximately $130 billion on capital procurement over the next five to six years. The government aims to cut reliance on imported military equipment by boosting domestic defence manufacturing. The Defence Ministry has set a target of $25 billion, or Rs 1.75 lakh crore, in defence manufacturing turnover within the next five years. Defence Minister Rajnath Singh recently announced plans to raise military hardware exports from the current Rs 21,083 crore to Rs 50,000 crore by 2028-29.