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  • Writer's picturePrabhat Phonedekar

Budget 2023: India set aside 5.94 trillion for defence spending

Updated: Feb 3, 2023

Budget allocations for 2023 out on Wednesday 01st February allocated 5.94 trillion for defence spending including a capital outlay of 1.62 trillion for military modernization.


According to documents, India set aside 5.94 trillion for defence spending in this year's budget, including a capital outlay of 1.62 trillion for military modernization, 13% more than in last year's budget estimates and about 2% more than in the revised estimates for 2022-23.


The budget includes a revenue expenditure of ₹2.7 trillion and a pension outlay of ₹1.38 trillion.


The defence budget for this year accounts for 2% of the country's projected GDP for 2023-24.


It accounts for 13% of the overall government budget.







The increased allocation comes at a time when India is embroiled in a border dispute with China and pursuing a slew of modernization programs, with a strong emphasis on deploying locally manufactured weapons and systems.


The capital outlay for this year is about 6% higher than in last year's budget estimates and about 8% higher than in the revised estimates for 2022-23.


The capital allocation will fund the acquisition of fighter aircraft, helicopters, warships, missiles, and a variety of land systems such as tanks and artillery guns.




“This expenditure will close critical gaps in the combat capabilities and equip the Forces in terms of ammunition, sustenance of weapons & assets, military reserves, etc," defence minister Rajnath Singh wrote on Twitter.


The increase in outlay will enable more local collaborations, critical technology development, and transfers as well as the development of skills in the country, said Ashish Saraf, country director, India-Thales.


“This will further support the government’s objective of developing India as a global manufacturing hub to aid defence exports, and the vision of ‘Aatmanirbhar Bharat’ (self-reliant India)," he added.


However, some experts believe the government could have set aside more funds under the capital head.


“We believe capex allocation misses a commensurate reflection of the government’s impetus on defence manufacturing," said Gaurav Mehndiratta, head of AeroSpace and Defence, KPMG India.


According to revised estimates in budget documents, the armed forces were unable to spend 2,369 crores of last year's capital outlay of 1.52 trillion.


Last year, the armed forces spent around 21,000 crores more than the previous year's budget allocation, owing to a lingering border dispute with China, which prompted India to make a slew of emergency purchases and sharpen its focus on building infrastructure in forward areas.


Last year, the defence ministry spent 1.53 trillion on pensions (revised estimates), compared to 1.19 trillion the previous year (budget estimates).


The increased spending was primarily due to revised pensions under the One Rank, One Pension (OROP) program for veterans.



The Union Cabinet, led by Prime Minister Narendra Modi, approved the revision of ex-servicemen and family pensioners' pensions under the scheme in December, with more than 2.5 million defence pensioners receiving arrears totaling Rs 23,638 crore.


The defence minister stated that the government is committed to improving border infrastructure, particularly along the country's northern borders with China.


“The capital budget of the Border Roads Organisation (BRO) has increased by 43% to ₹5,000 crores in FY 2023-24 as against ₹3,500 crores in FY 2022-23," he said.


Last year's budget allocated 5.25 trillion for military spending, 4.78 trillion for 2021-22, and 4.71 trillion the year before.





According to the budget documents, Agniveers' payment from the Agniveer corpus fund is proposed to be tax-free.



“Deduction in the computation of total income is proposed to be allowed to the Agniveer on the contribution made by him or the central government to his Seva Nidhi account."



The Agnipath model for short-term induction of soldiers into the three services is a significant departure from the military's decades-old recruitment system, which was phased out when the new scheme was announced in 2022.


It intends to recruit soldiers for only four years, with a provision for 25% of them to be retained in regular service.


Those who are released after four years will receive a Seva Nidhi severance package worth 11.71 lakh, which includes the 5.02 lakh they contributed during their service.






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