Budget 2023: Defence budget sees nearly 13% hike, gets allocation of Rs 5.93 lakh crore

With an eye on the mounting tensions on its two-front border, the Union budget saw a 12.95 percent hike in allocation for defence, at Rs 5.93 lakh crore.

Keeping its priorities, the government also earmarked a healthy allocation for the one-rank-one-pension (OROP) scheme.

The capital outlay also went up by Rs 10,000 crore, reaching Rs 1.62 lakh crore.

Underlining the importance of overall maritime security, the capital budget of the Indian Navy has been enhanced by 44.53 percent, with a total allocation of Rs 46,323 crore in FY2023-24.

"The Union Budget for the financial year 2023-24 presented by the finance minister has given further impetus to modernisation of defence services and defence security infrastructure development, including the border road infrastructure and coastal security infrastructure,” an official release by the ministry of defence (MoD) said.

Of the total outlay of Rs 39.45 lakh crore in 2023-24, the ministry of defence has been allocated a total budget of Rs 5.93 lakh crore.

In the process, the final allocation of funds turned out to be higher than 11 percent of what the ministry of defence had sought from the 15th Finance Commission.

This allocation also includes Rs 1.19 lakh crore for defence pensions, showing the importance the government attached to the OROP scheme.

The total defence budget represents an enhancement of Rs 46,970 crore (9.82 percent) over the Budget Estimates of 2021-22, the official release said.

Defence experts praise hike in allocation

“It is a very good budget and the allocation of healthy funds for the Line of Actual control (LAC) with China is very heartening. It is important that India match China’s infrastructure on the LAC and this is a step in the right direction,” Lt Gen RK Sharma (Retd), former Adjutant General, told Moneycontrol.

Defence financial experts said that the allocation was on expected lines – in fact, if anything, a trifle higher than anticipated. Amit Cowshish, a former financial advisor (acquisition), ministry of defence, told Moneycontrol: “The budget is on expected lines. The ministry of defence has got more than it had sought. The revenue budget has gone up substantially. On the flip side, capital outlay has been affected. In addition, there is a substantial increase in pensions, as promised by the government.”

The capital budget of Border Roads Organisation (BRO) has been increased by 40 percent to Rs 3,500 crore in FY2023-24 vis-à-vis Rs 2,500 crore in FY2022-23.

This will expedite border infrastructure, including important tunnels, like Sela and Naechiphu, and bridges on major river gaps. This increased allocation shall facilitate the procurement of modern construction plants, equipment, and machinery to enhance the pace of construction warranted by strategic imperatives.

76% enhancement in allocation over 9 years

A large share of increased funding will be used for the better upkeep of strategic roads in border areas, and it will also boost the construction of strategically important roads, along the northern and north-eastern borders.

“Through enhanced budgetary support over the years, the government has placed modernisation and infrastructure development of the armed forces at the centre stage of national security and defence planning. The total allocation under the capital outlay of the defence services has been increased from Rs 86,740 crore in 2013-14 to Rs 1.52 lakh crore in 2022-23. There is an enhancement of 76 percent over a period of nine years. Further, during this period, the total defence budget, including defence pensions, has increased by 107.29 percent, from Rs 2.53 lakh crore in 2013-14 to Rs 5.25 lakh crore in 2022- 23,’’ the MoD release added.

In a sustained thrust on modernisation and infrastructure development, the capital allocation for modernisation and infrastructure development has been significantly hiked to Rs 1.52 lakh crore.

This represents an increase of Rs 17,308 crore (12.82 percent) over FY2021-22. Further, the cumulative increase in the capital budget since 2019-20 has been Rs 48,975 crore (47.37 percent).

Push for Aatmanirbhar Bharat

“The increase in the overall capital budget reflects the government’s resolve towards sustainable enhancement in the modernisation and infrastructure development and towards achieving the objectives of ‘Aatmanirbhar Bharat’. To give a push to indigenous domestic enterprises under Aatmanirbhar Bharat’, the share of domestic capital procurement, which was earmarked at 64 percent in 2021-22, has been enhanced to 68 percent of the capital acquisition budget of the defence services (Rs 1.24 lakh crore) for FY2022-23, which would be Rs 84,598 crore,” the MoD release said.

Underlining the importance of overall maritime security, the capital budget of the Indian Navy has been enhanced by 44.53 percent, with a total allocation of Rs 46,323 crore in FY2023-24. This increase is aimed at the acquisition of new platforms, creation of op and strategic infrastructure, bridging critical capability gaps and building a credible maritime force for the future, officials said.

To further boost coastal security, the capital budget of the Indian Coast Guard has been enhanced by 60.24 percent to Rs 4,246 crore in FY2022-23 vis-à-vis Rs 2,650 crore in FY2021-22. This enhancement is aimed at acquiring ships and aircraft, augmentation of infrastructure, establishment of coastal security network and building technical and administrative support structures.

According to the official release, Rs 173.03 crore and Rs 131.08 crore have been provisioned under the Directorate General Defence Estates (DGDEs) capital budget for budget estimate (BE) 2022-23 and revised estimate (RE) 2021-22, respectively, mainly for the construction of boundary posts/pillars and perimeter fencing of defence land.

This is directed for preventing encroachment on defence land.

Largest landowner in the country

The ministry of defence is the largest landowner in the country, with prime land parcels in all metropolitan and urban areas.

For hand-holding the newly-created seven defence public sector undertakings (DPSUs), Rs 1,665 crore in RE 2021-22 and Rs 1,310 crore in BE 2022-23 have been earmarked for their planned modernisation. Additionally, Rs 2,500 crore in BE 2022-23 and in RE 2021-22 have been set aside as Emergency Authorization Fund.

In keeping with its stated aim of self-reliance or Atma Nirbharta, the government is committed to reducing the import of equipment for the armed forces.

In a significant announcement, 68 percent of the capital procurement budget will be earmarked for the domestic industry in 2023-24, up from 58 percent in 2022-23.

In addition, defence R&D will be opened for industry, startups and academia, with 25 percent of defence R&D budget earmarked. The private industry will be encouraged to take up the design and development of military platforms and equipment in collaboration with the Defence Research and Development Organisation (DRDO) and other organizations through the Special Purpose Vehicle (SPV) model.

The nodal umbrella body for testing, certification

An independent nodal umbrella body will be set up for meeting wide-ranging testing and certification requirements, the release said.

In a series of tweets, defence minister Rajnath Singh congratulated the finance minister, saying that the budget would give a fillip to ‘Make in India’, boost demand, and build capacities for a stronger and confident India.

Maj. Gen AK Siwach, former head of, the Territorial Army, told Moneycontrol: "There was the expectation of a strong defence budget and that is the way it has turned out to be. There is stress on infrastructure in Arunachal Pradesh and Ladakh, there is self-reliance in defence production and pensions are being looked after. All in all, this budget is forward-looking and considers all aspects of the defence sector. It is much needed today."