Unpacking the Union Budget’s Strategic Push for Self-Reliance
India is increasingly asserting its ambition to become a formidable global defence powerhouse. This trajectory is not merely aspirational but is rigorously backed by strategic budgetary allocations and an unwavering focus on Aatmanirbharta (self-reliance), a cornerstone policy championed by the Modi government. The nation’s defence sector is undergoing a transformative phase, moving towards indigenous capabilities and reducing dependence on foreign imports.
The strategic intent was clearly articulated in the Union Budget 2024-25, which laid a robust foundation for modernization and indigenous production. Building on this momentum, the upcoming Union Budget 2025-26 is set to amplify this commitment, charting a course for unprecedented growth and innovation within the Indian defence industry. This holistic approach signals a decisive shift towards fortifying national security while simultaneously spurring economic development through domestic manufacturing.
Key Aspects Examined
1. A Robust Defence Allocation
The financial commitment to defence has seen consistent and significant increases, reflecting the government’s priority on national security and modernization.
- FY 2024-25:
- Total defence budget (including pensions): ₹6,21,941 crore (approx. $75 billion).
- Increase over previous year: 7.1%. Excluding pensions: 8.6% increase, the highest among all ministries.
- Capital budget increase: 15%, specifically focusing on modernization.
- Domestic procurement reservation: 75% of modernization outlay (₹1,05,518.43 crore) for Indian industries, strongly emphasizing indigenous production.
- FY 2025-26:
- Ministry of Defence allocation: ₹6,81,210.27 crore.
- Increase over FY 2024-25 estimates: 9.53%.
- Capital outlay for modernization: ₹1.80 lakh crore (for advanced technologies and platforms).
- Domestic procurement reservation: 75% of modernization budget (₹1,11,544.83 crore) dedicated to domestic procurement.
- Domestic private industries reservation: 25% of the modernization budget specifically for domestic private industries.
2. Boosting Innovation with R&D Spending
Research and Development (R&D) is a critical pillar of self-reliance, receiving substantial allocations to foster innovation.
- FY 2024-25:
- DRDO allocation: ₹23,855 crore. Capital expenditure for R&D: ₹13,208 crore.
- Funding increase for technology development support under “Make” programs: 45%.
- Innovations for Defence Excellence (iDEX) budget: ₹518 crore (up from ₹115 crore in FY 2023-24).
- Acing Development of Innovative Technologies with iDEX (ADITI) scheme allocation: ₹400 crore.
- Technology Development Fund (TDF) annual allocation: ₹60 crore (for startups and MSMEs).
- FY 2025-26:
- DRDO allocation increase: ₹26,816.82 crore (12.41% hike).
- Private sector-driven R&D fund (under Department of Science and Technology): ₹20,000 crore.
- Focus of the private sector fund: Innovation in emerging technologies like artificial intelligence (AI) and deep tech.
3. Empowering the Private Sector
The government is actively fostering the involvement of the private sector, recognizing its pivotal role in achieving defence self-reliance and accelerating innovation.
- FY 2024-25:
- Private sector contribution to total defence production: ₹33,979 crore (22.56%).
- Instrumental schemes: iDEX, Defence Testing Infrastructure Scheme (DTIS).
- ADITI scheme outlay: ₹750 crore over three years (engaging private entities via Development-cum-Production Partner program).
- “Make” procedure in capital procurement: Up to 70% government funding for development costs to Indian industries, with reservations for MSMEs.
- FY 2025-26:
- Reservation for procurement from domestic private industries: 25% of the domestic modernization budget (₹27,886.21 crore).
- Impact: Boosts role of private players, including startups and MSMEs, across the defence ecosystem.
4. Streamlining Processes: The “Year of Reforms”
To further enhance efficiency and accelerate indigenous procurement, the government is committed to simplifying acquisition rules and processes.
- FY 2024-25:
- Reservation of 75% of modernization outlay for domestic industries.
- Rationalization of acquisition through joint procurement at the defence services level.
- Acceptance of Necessity (AoN) for indigenous defence industries (over 96% in FY 2022-24).
- Introduction of simplified “Make” guidelines to attract more players (startups, MSMEs).
The upcoming FY 2025-26 is designated as a “Year of Reforms” for the Ministry of Defence. The primary objective is to simplify the Defence Procurement Procedure and ensure optimal fund utilization. This initiative aims to cut bureaucratic red tape, accelerate decision-making, and create a more business-friendly environment, with a strong emphasis on transparency and efficiency in domestic procurement. This strategic move is poised to make the acquisition process more agile and responsive to the evolving needs of the defence industry.
Conclusion
The Modi government’s approach to defence budgets (2024-25 and 2025-26) signifies a transformative phase for India’s national security and economic growth. The consistent increase in defence allocation, focus on capital expenditure, and robust push for indigenous production are designed to reduce import dependence and bolster strategic capabilities.
The surge in R&D spending, especially the private sector-driven fund for emerging technologies like AI and deep tech, is a key innovation driver. Coupled with enhanced private sector participation and the upcoming “Year of Reforms” to simplify the Defence Procurement Procedure, these initiatives are crucial for a truly Aatmanirbhar and globally competitive Indian defence industry.
These strategic moves represent smarter investment, stronger building, and ultimately, securing India’s future on the global stage.
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