9% Increase In Indian Defence Budget For 2023 Amid Rising Chinese Belligerence

Indian Union Finance Minister Nirmala Sitharaman said that 68 percent of the defence procurement budget in FY23 would be earmarked for domestic equipment, up 10 percentage points from FY22.

According to Budget documents, the capital expenditure outlay for the defence sector has increased significantly, by 13%, in FY23 to Rs 1.52 trillion from Rs 1.35 trillion in FY22 while revenue and pension expenditure have remained stable. In total, the Budgetary allocation to the Ministry of Defence has risen 9% year-on-year to Rs 5.25 trillion in FY23 from Rs 4.7 trillion in FY22.

With India facing threat of a two-front war – Chinese PLA in the east and Pakistan in the west – military modernisation becomes a top notch priority for the Indian Government.

Although India’s defence budget is the fifth-largest in the world (after the US, China, Saudi Arabia and Russia), it is way lower than what China spends. According to experts, China’s defence budget is about 3 percent of its GDP, while India spends only 1.58 percent of its GDP on its defence forces.

The Indian army is one of the largest in the world due to which huge sum of the defence budget goes into paying salaries and pensions, which sometimes become a stumbling block. However, Prime Minister Narendra Modi has made his intent for defence modernisation and spending very clear with new purchases like Rafale jets.

The Modi government last year increased the defence capital expenditure by 19 percent – the highest ever increase in last 15 years
to buy weapons and other military equipment for the defence forces.

The FM pushed for more self-reliance in defence and said she wanted to encourage research and development by private corporations, start-ups and academia into defence research and equipment development.

“Artificial intelligence, geospatial systems and drones, semiconductors and its ecosystem, space economy, genomics and pharmaceuticals, green energy, and clean mobility systems have immense potential to assist sustainable development at scale and modernize the country,” the minister added.

The private sector can also now develop military platforms in collaboration with the government-owned Defence Research and Development Organisation. The defence budget consists primarily of a large capital outlay, revenue expenditure (for small acquisitions and spares) and defence pensions.

In FY22, the ministry’s capital outlay was Rs 1.35 trillion, a jump of almost 19 percent over FY21, with the bulk targeted at new acquisitions and military modernisation.

The revenue outlay had marginally increased to about Rs 2.12 trillion while the defence pensions outlay reduced year-on-year to about Rs 1.16 trillion.

Despite only a modest increase in outlay last year, News18 reported that the defence services had been unusually slow in spending their capital budgets this fiscal, with the army spending only about 40 percent of its allocation, while the Indian Air Force (IAF) has spent about 70 percent. The navy spent 90 percent of its capital outlay for the fiscal.

The report quoted unnamed sources as saying that Defence Minister Rajnath Singh had asked senior military officials to expedite spending of their capital budgets by the end of the financial year.