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Defence Budget 2023-24: Capability Building Projections

A primary constant for shaping defence capability for a government is budgeting. As a tool defence budget can effectively outline the priorities for the armed forces based on the threats envisaged, capability desired and existing and resource allocations to make up the gaps.

This exercise is an intricate one and is driven by the Cabinet Committee on Security (CCS) Directive to the armed forces, the long term capability plans translated into five year and annual acquisition plans derived thereof.

A word of caution the terminologies keep changing for instance previously Defence Minister’s Directive was used in lieu of CCS Directive. In addition injection of the Department of Military Affairs (DMA) may have added some layers to the process.

The Revenue budget that is essentially for running of the armed forces including pay and allowances can be measured reasonably accurately and would be indexed to inflation.

As pensions are now under a separate head for accounting purposes at least there is greater clarity in budget that is available to the defence services.

For the capital allocations that are required especially for defence acquisitions the counting is possibly a mix of incrementalism that is accretions in terms of percentage to the budget and revised estimates which is generic in nature and specific capability building projections made by the armed forces.

There is a degree of flexibility that has been granted to the armed forces for emergency procurement in recent years, thus the capital acquisition budget should be following the pathways desired through the Annual Acquisition Plans of the services.

The Numbers 2022-23

For 2022-23 allocations for defence were Rs 5,25,166.15 Crore and Outlay excluding Pensions was Rs 4,05,470.15 crore.

This was 13.31 per cent of the total budget Union Government budget.

The Fiscal Burden in 2023-24

Some estimates on the general constraints in the Union Budget made denote that a, “fifth of the central government’s total expenditure is earmarked for payment of interest on the loans that it has taken”.

In the same vein the International Monetary Fund [IMF]has estimated that interest payments by the Central Government as percentage of GDP will rise to 3.5 percent in the 2022-23 and 3.7 percent of GDP in 2023-24.

Projections for 2023-24

Given these numbers while there is likely to be an increase in the defence budget this may rise to Rs 5.75 Lakh Crore overall and Rs 4.60 Lakh Crore for the defence services. In the best case scenario these figures could touch Rs 6 Lakh Crore and Rs 5 Lakh Crore respectively.

Some estimates made such as by OmniScience Capital CEO and Chief Investment Strategist Vikas Gupta expect the defence budget to be Rs 6.6 lakh crore.

On the face of this the amount appears to be excessive but we will come to know on February 01 when the Defence Budget is presented by the Finance Minister Ms Nirmala Sitharaman.

Adequacy of Projections for Capability Building

Capability building through making up deficiencies in the current inventory, upgrades and new acquisitions has been allocated 39.54 percent of the overall defence budget for the services of which 32.28 percent is for capital acquisition and modernisation.

If the optimist projection of allocation for defence services of Rs 5 Lakh Crore is made than Rs 1.60 Lakh crore could be available for capital acquisitions and modernisations.

This will be accretion of over Rs 36000 Crore for 2023-24.

Given the pace of acquisitions of the services this may seem adequate but will this be enough to build capacities that are desired can be determined once the breakdown of allocations to include distribution of funds for combat equipment is evident in the budget figures on February 01.


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