DPG Policy Brief
India’s Defence Budget 2024-25
Date: August 02, 2024
India's FY 2024-25 defence budget reflects the nation's strategic priorities amid a complex geopolitical environment that is characterised by tensions with China and Pakistan, internal security concerns, and global disruptions. The budget allocation of Rs 621,941 crore (USD 74.3 bn) marks a slight increase from the previous year, with emphasis on modernising the armed forces and enhancing domestic defence production. However, defence spending as a percentage of GDP has declined to 1.9%, posing challenges to meeting long-term security and modernisation goals.
The budget allocates 45% to revenue expenditure, focusing on operational preparedness, including pay and allowances, while 27.66% is directed towards capital outlay for acquiring new equipment, and pensions account for 22.70%. A notable aspect is the earmarking of 75% of the modernisation budget for domestic procurement, reflecting a strong push for self-reliance under the Aatmanirbharta initiative.
The allocation for modernisation of the three services shows an increase of 5.4% over the allocation of FY 2023-24. However, since there is no separate distinction in the modernisation head on the Committed Liabilities for equipment already purchased and the new equipment to be procured during the year, it is difficult to assess the pace of modernisation.
The provision for defence R&D remains limited, with the DRDO receiving only 3.84% of the total defence budget. This allocation is insufficient for significant advancements in high-tech areas, underscoring the need for increased investment and private sector participation.
The ongoing standoff at the Line of Actual Control has prompted the government to focus on improving the border infrastructure. The Border Roads Organisation has been provided Rs 6,500 crore, which is 30% higher than the allocation for 2023-24.
The author recommends that to meet the modernisation goals, capital expenditure must be based on a long-term capability development plan that is approved by the Ministry of Finance. Currently, there is a glaring disconnect between the Services' plans for modernisation and the finances allocated each year.
Estimates suggest that the Indian armed forces will spend $130 billion on capital procurement over the next five to six years. The government must promote private sector-led initiatives, including grants and streamlined procurement processes, to bolster innovation and capacity building.
The current budget reflects the government's priority for self-reliance in the defence industry. Some additional focus is required on modernisation and defence R&D to build capabilities that are better aligned with India's strategic challenges.
To read this Policy Brief Vol. IX, Issue 18, please click "India’s Defence Budget 2024-25".
The budget allocates 45% to revenue expenditure, focusing on operational preparedness, including pay and allowances, while 27.66% is directed towards capital outlay for acquiring new equipment, and pensions account for 22.70%. A notable aspect is the earmarking of 75% of the modernisation budget for domestic procurement, reflecting a strong push for self-reliance under the Aatmanirbharta initiative.
The allocation for modernisation of the three services shows an increase of 5.4% over the allocation of FY 2023-24. However, since there is no separate distinction in the modernisation head on the Committed Liabilities for equipment already purchased and the new equipment to be procured during the year, it is difficult to assess the pace of modernisation.
The provision for defence R&D remains limited, with the DRDO receiving only 3.84% of the total defence budget. This allocation is insufficient for significant advancements in high-tech areas, underscoring the need for increased investment and private sector participation.
The ongoing standoff at the Line of Actual Control has prompted the government to focus on improving the border infrastructure. The Border Roads Organisation has been provided Rs 6,500 crore, which is 30% higher than the allocation for 2023-24.
The author recommends that to meet the modernisation goals, capital expenditure must be based on a long-term capability development plan that is approved by the Ministry of Finance. Currently, there is a glaring disconnect between the Services' plans for modernisation and the finances allocated each year.
Estimates suggest that the Indian armed forces will spend $130 billion on capital procurement over the next five to six years. The government must promote private sector-led initiatives, including grants and streamlined procurement processes, to bolster innovation and capacity building.
The current budget reflects the government's priority for self-reliance in the defence industry. Some additional focus is required on modernisation and defence R&D to build capabilities that are better aligned with India's strategic challenges.
To read this Policy Brief Vol. IX, Issue 18, please click "India’s Defence Budget 2024-25".
