Ritika Dangemoneycontrol.com
The Finance Minister in his first full Union Budget today announced a proposal to hike defence spending to Rs 2.46 lakh crore. Speaking on the steps taken to boost the defence sector, Jaitley said the government is working towards self-sufficiency through the Make in India programme and added that the government has been both transparent and quick in making defence equipment related purchase decisions.“This year too, I have provided adequately for the needs of the armed forces. As against likely expenditure of this year of Rs 2,22,370 crore the Budget allocation for 2015-16 is Rs 2,46,727 crore,” Jaitley said in the parliament today.
The sector has only recently seen a spurt of activity after the Prime Minister Narendra Modi announced his Make in India policy with the sole intention of transforming India into a global manufacturing hub in September 2014.
The local manufacture of defence equipment is the focal area of Modi’s Make in India programme given that India imports nearly 60 percent of its defence equipment. The government has increased the foreign direct investment (FDI) cap from 26 percent to 49 percent hoping to get more global players into the sector that is currently dominated by Indian companies. The government has also arranged for FDI beyond 49 percent but only on a case-to-case basis with the approval of Cabinet Committee on Security.The business potential in the sector is huge. According to the Federation of Indian Chambers of Commerce and Industry (FICCI), the annual opportunity for Indian companies is expected to reach USD 41 billion by financial year 2022 and USD 168 billion cumulatively.
The Defence Ministry expects the defence Budget to grow at a compounded annual growth rate (CAGR) of 8 percent to touch USD 64 billion in the financial year 2020, says a KPMG India report.Here's what was announced in the last Budget:
- The FM Arun Jaitley had announced a 12 percent increase (USD 38.35) billion in defence spending in 2014-15 over the previous year’s Budget.
- Jaitley also increased the foreign direct investment in the domestic defence industry to 49 percent from 26 percent.
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