Union Budget 2025-26: Although tensions have palpably reduced on the Line of Actual Control (LAC), but the forces of India and China have not demobilised and a major chunk still remains deployed on the frigid heights of Eastern Ladakh. The stand-off with China has put a spotlight on the slow pace of modernisation of the Indian Armed Forces. Although strong efforts are being made to increase the pace of modernisation of the armed forces to take on any challenge in the future.
The conflicts in Ukraine, West Asia and the growing pace of defence technology has underscored the importance of improving domestic defence industry. The government and the armed forces are committed to Aatmanirbharta in defence. Last year’s defence budget had put a special emphasis on promoting the Indian defence ecosystem. The government had taken a two-pronged approach as was demonstrated by the budget, the first of these was the large share of the financial resources for the acquisition from domestic industry and the second approach was to provide more resources for Research and Development.
Last year, the government allocated Rs 6,21,940.85 crore (US $75 billion) to the Defence Ministry. Of the total amount allocated 27.66% was earmarked for acquisitions, 14.82% for revenue expenditure (sustenance and operational preparedness), 30.66% for salaries and allowances, 22.70% for pensions and 4.17% for civil organisations under the defence ministry.
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Off the capital outlay of Rs 1.72 lakh crore, the lion’s share of the budget at Rs 1.05 lakh crore was earmarked for procurements from India firms. This allocation is in line with the government’s goal of self-reliance in the defence sector. As India is in it ‘Amrit Kaal’ – the lead up to the centenary of our independence the focus of the government is to make India a prosperous nation by 2047. Focus on Aatmanirbharta will be an important consideration when allocating resources.
It is expected that the growth in the defence budget will be driven by the Capital Expenditure (CapEx). The government is expected to increase this head of the budget by approximately 11% – 15%. This would see the figure rise from Rs 1.90 lakh crore to Rs 1.99 lakh crore. If the government maintains the 75% of CapEx budget for domestic procurement. In this scenario as much as Rs 1.50 lakh crore worth of defence equipment could be procured from within India.
The Border Roads Organisation (BRO) is also expected to see an increase in its budget. Last year the government had increased the budget of the BRO by 30% to Rs 6,500 crore. The organisation is looking after the construction of 10,023 kms of road under the India China Border Roads program. Around 31 tunnels are also at various stages of completion on our frontier roads, including the Zojila Tunnel as well as some other tunnels that will open a perennial road link from Himachal Pradesh to Ladakh.
In FY 2024-25 the government had allocated Rs 23,855 crore for defence R&D. Recently DRDO chief had said that nearly $10 billion are required for R&D. It is expected that the highest increase in terms of percentage growth could be expected under this head. The requirement as per the DRDO chief is thrice that of the requirement. Funds for iDEX and Technology Development Fund are also expected to see a major increase.
Pension funds and salaries are also expected to increase. More changes could be expected under this head dependent upon when the government plans to roll out the 8th Pay Commission.
