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Defence Budget: 2023-24- Incrementalism Stumps Capability Building

Five recommendations for Defence Budget to ‘deliver more bang from the buck’

India’s need for investment in defence capability building is never so clear as at present times. An adverse dual front collusive threat from China and Pakistan, a rapidly modernizing People’s Liberation Army (PLA) which is informationising and intelligentising, meeting aspirations of integrated deterrence in the Indo Pacific by the United States, deficits in defence capabilities which are well known such as the two thirds gap in fighter squadrons of the Indian Air Force, necessity for upgrading from a 3.5 generation to a 4.5 generation force, large manpower and pension budget and so on.

To meet this diverse spectrum of challenges, budgeting is an effective tool but India’s Ministry of Finance and Defence have continued with an incremental approach, shorn of attempts to reform the approach despite some well considered proposals that have been suggested by august bodies as the Parliamentary Committee on Defence and 15th Finance commission.

While a budget to cover multiple capability requirements is well nigh impossible given constraint of resources particularly in an election heavy period, available budgetary tools could have been exploited, yet possibly in an election year[s] there is no appetite for risk taking.

Funding essentials such as pay and allowances and pensions with a rising One Rank One Pension bill for the current year for equalizing and providing for committed liabilities with limited sums left for new acquisition plans is the trend line evident in Defence Budget 2023-24.

This appears to be the logic of the Defence Budget presented as part of the Union Budget by the Finance Minister Ms Nirmala Sitharaman. Ms Sitharaman also has the unique experience of having served as the Defence Minister of India under the previous tenure of the government.

While this would have provided her a good perspective of essentials of financing defence programmes, the experience could have also led to realistic appraisal of what is non essential thus cutting back on the demands made by the services.

Broad Numbers

In a total outlay of Union Budget for Financial Year 2023-24 of Rs 45,03,097 crore, [ $550bn] Ministry of Defence has been allocated of Rs 5,93,537.64 crore, ($72.6 billion)which is 13.18 % of the total budget. This includes an amount of Rs 1,38,205 crore for Defence Pensions.

The Defence Budget represents an enhancement of Rs 68,371.49 crore (13%) over the Budget of 2022-23. Capital allocations for modernisation and infrastructure development of the Defence Services has been increased to Rs 1,62,600 crore representing a rise of Rs 10,230 crore (6.7%) over FY 2022-23.

Which implies that the salary and pension portion of the budget has received a higher increase. This is notable with Defence Pension Budget registering a notable jump of 15.5 % in FY 2023-24. This is mainly due to amount of Rs 28,138 Crore to meet the requirement on account of revision of Armed Forces Pensioners/ Family Pensioners under One Rank One Pension (OROP).

A welcome development however appears to be an increase in the Non-Salary Revenue/operational allocation boost of Rs 27,570 Crore, with the budgetary outlay under this segment augmented from Rs 62,431 crore in BE 2022-23 to Rs 90,000 crore in BE 2023-24.

This is part of the Revenue budget but caters for maintenance of weapons systems, serviceability of fleet and emergency procurements with view to meet the critical requirements of the forces who are presently in a No War No Peace Posture on two fronts Line of Actual Control (LAC) with China and the Line of Control (LOC) with Pakistan.

A degree of assurance of provision for current defence readiness is evident unless of course the military fumbles.

What is however distressing is lack of reforms in the budgeting process which may have generated higher level of funding for new acquisitions subject to of course the services ability to get their act together in the intricate field of procurement

Tweaking Defence Budgeting Process

What can be done for the defence budget to deliver, ‘more bang for the buck,’ as the saying goes.

The first requirement is for greater coordination of budgeting between the Ministry of Finance and Defence. Importantly while the Ministry of Defence has projected requirements of funds for Five Year Defence plans, the parliamentary committee on defence was informed that “Five Year Defence Plans have never been got final approval of Ministry of Finance.”

As a result the Ministry of Defence send the 13th Defence Plan to the Ministry of Finance, “only for information and not for its approval”. Thus it is apparent that defence budgets are prepared in isolation.

With two senior ministers of the government Defence and Finance both being members of the Cabinet Committee on Security (CCS), this anomaly appears to be atypical silo functioning of government.

Lack of coordination is evident in the shortfall in allocations vis a vis projections from the Ministry of Defence depositions before the Parliamentary Committee on Defence which states, “In BE 2022-23, an amount of Rs. 1,52,369.61 crore has been allocated against projections of Rs. 2,15,995.43 crore in Capital Head under Defence Services Estimates”.

The Ministry of Defence expects to make up this deficit of Rs 60,000 Crore [approximately US $6 Billion] by seeking additional funding if necessary suggesting an adhoc approach.

Secondly the Defence Planning Committee (DPC) that is set up for “comprehensive and integrated planning for defence matters, under the chairmanship of the National Security Adviser (NSA) with the Chief of Defence Staff, Service Chiefs, Defence Secretary, Foreign Secretary and Secretary (Expenditure), as members should be able to overcome the anomaly above.

Whether this has been done or not is unclear but interventions in a positive manner may be welcome.

Thirdly while the government has ambitious plans of Atma Nirbhar Bharat in defence and priority is being given in acceptance of necessity (AON) to IDDM (Indigenous Design, Development and Make) category of acquisitions, the funding for R & D remains stunted.

As the parliamentary committee on defence has been informed “India is funding 6% on Defence R&D of the Defence Budget whilst, USA and China are spending approximately 12% and 20%, respectively on Defence (R&D) as compared to their Defence Budget”.

Clearly the IDDM model will continue to rely on foreign inputs to the extent of 40-50 % though this is not negative in a way but can be reduced by adding to the Defence R & D budget.

Fourthly one way of provision of funding for research is through, “Techonology Development - Assistance for prototype development under make procedure,” allocations for this head over the past two years have been statis as is seen from the capital budget for the DRDO. While the IAF has been allocated Rs 1000 Crore or so in the Budget 2022-23, with limited expenditure the same has been repeated, while other services apparently have not projected any requirement under this head.

Finally, while the 15th Finance Commission has recommended Modernisation Fund for Defence and Internal Security (MFDIS) to bridge the gap between projected budgetary requirements and budget allocation which is non-lapsable there are no indications that such a fund has been created.


Budget provides an overall direction of the government to defence capability building.

Reforming the budget process is important to involve all stakeholders including the defence and finance ministry and the services.

This should be a part of the overall defence reforms in India which apart from ‘theaterisation,’ and ‘indigenisation,’ appear to be off the radar.


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