Defence Budget Seeks to Support Domestic Players

Finance Minister Nirmala Sitharaman announced today that the government has allotted 68 percent of defence capital procurement budget has been allocated towards local procurement for the year 2022-2023. This figure last year stood at 58 percent.

The government has also set aside 25 percent of the annual research and development budget of the defence ministry for private companies and start-ups.

“Private industry will be encouraged to take up design and development of military equipment in collaboration with DRDO through a Special Purpose Vehicle (SPV) model,” she said.

She highlighted that technologies like artificial intelligence (AI), geospatial systems, drones, semiconductors and its ecosystem, space economy, genomics and pharmaceutical, and clean mobility systems as areas of focus. “[They] have immense potential to assist sustainable development at scale and modernise the country,” said Sitharaman.
A new ‘independent, umbrella’ body will be set up for private players to test new technology and get certified.

The capital expenditure outlay for the defence sector has increased by 13 percent 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 nine percent year-on-year to Rs 5.25 trillion in FY23 from Rs 4.7 trillion in FY22.