Union Budget 2022 | Marginal hike in defence budget, emphasis on Make in India

In a further push for Make in India in defence,the Union government on Tuesday announced additional measures to boost domestic manufacturing and reduce imports. The total allocation for defence in the Budget has gone up marginally to ₹5.25 lakh crore.This isup by 4.43% higher than the revised estimates of last year and 9.8% higher over the Budget estimates of last year.

Finance Minister Nirmala Sitharaman announced that defenceresearch anddevelopment (R&D) would be openedupfor industry, start-ups and academia with 25% of R&D budget earmarked for them.

Special purpose vehicle model

“The private sector will be encouraged to take up design and development of military platforms and equipment in collaboration with DRDO and other organisations under the special purpose vehicle (SPV) model,” Ms. Sitharaman said in her Budget speech. “An independent nodal umbrella body will be set up for meeting wideranging testing and certification requirements,” she announced.

Of the ₹5.25 lakh crore for defence this year, the revenue allocation is ₹2.33 lakh crore, capital allocation ₹1.52 lakh crore and defence pensions ₹1.19 lakh crore.

Within this, of the ₹1.52 lakh crore capital allocation that is meant for new purchases and payments for past procurements, 68% would be reserved for procurement from the domestic industry, Ms. Sitharaman stated.In last year’s budget,₹70,221crore of the capital allocation, which is about 63%, wasreserved forthe domestic industry.

Last year, the budget for defence saw a major increase in the backdrop of the stand-off with China in eastern Ladakh. The Services also made several emergency procurements in the second half of 2020.

In contrast, the budget data shows that for 2021-22, the Army returned around ₹11,100 crore, while the Navy got an additional allocation of ₹12,767.99 crore compared to the budget estimates to the revised estimates.

Overall, the capital allocation saw an increase of 12%, compared to the budget estimates of last year and 9.7% with respect to the revised estimates.

As part of major reforms, to boost domestic manufacturing,in 2020, thegovernmentannounceda separate budgetary provision for procurementsfrom the domestic industry within the defence budget andalsoanegative import listfor weapons and military platforms.

SIDM hails announcements

Welcoming the announcements,industry bodySociety of Indian Defence Manufacturers (SIDM) saidsetting aside 68% of capital outlay for the domestic industry would sustain investments and attract fresh capacity creation. “Creation of a nodal body for setting up testing and certification requirements of defence systems and platforms will help the domestic industry through faster processes and cost-efficiency,” SIDM president SP Shukla said. “Allocation of 25% of defence R&D budget for start-ups, academia and private industry is a much-needed reform,” he noted.

Welcoming the move to open up R&D for start-ups,Vice Admiral Paras Nath (retd.),group president, defence engineering division,Crown Group,said this would be a “positive move in particular to start-ups andMicro, Small and Medium Enterprises (MSME)to have their inhouse R&D.”