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Defence Budget 2022 Puts Spotlight On R&D in Defence; Reserves 68% of Capital Budget For Domestic Industry

In the Union Budget 2022-23 on Tuesday, a total of Rs 5.25 lakh crores has been allocated to the Defence Ministry and the Services this year. Overall, the budgetary allocation is increased by Rs 47,000 crores from last year's allocation of Rs 4.78 lakh crores which is around 10% compared to the last year. While the announcement to reserve 68% of the capital procurement budget for domestic industry is towards indigenization, the finer aspect of the budget is the focus on R&D.

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In the Union Budget 2022-23 on Tuesday, a total of Rs 5.25 lakh crores has been allocated to the Defence Ministry and the Services this year. Overall, the budgetary allocation is increased by Rs 47,000 crores from last year's allocation of Rs 4.78 lakh crores which is around 10% compared to the  last year. This amounts to 13.31% of the Union Budget 2022-23 which is Rs 39.45 lakh crore.

Furthermore, an amount of Rs 1.19 lakh crores has been allocated for defence pension budget of the ministry. As per government data, total Defence Budget including Defence Pensions has increased by 107.29%, from Rs 2.53 lakh crore in 2013-14 to Rs 5.25 lakh crore in 2022-23.

Out of the total defence budget, Rs 1.52 lakh crore has been allocated for the capital acquisition to modernise the armed forces. Capital acquisition is meant for buying and upgrading military equipment which is fundamental to the defence modernization plan of Indian Armed Forces. This represents an increase of Rs 17,308 crore (12.82%) over 2021-22. Further, cumulative increase in the Capital Budget since 2019-20 has been Rs 48,975 crore (47.37%).

Government’s thrust remains on the indigenization for the defence sector as 68% of capital (Rs 1.24 lakh crore)  is marked for the domestic industry. 

“68% of the capital procurement budget for defence to be earmarked for domestic industry to promote Aatmanirbharta and reduce dependence on imports of defence equipment. This is up from the 58% last fiscal,” Finance Minister Sitharaman said. 

One of the finer points of the budget is the thrust on the R&D which is the proposal to reserve 25 per cent of the R&D budget for start-ups and private actors. Though not specific to defence, the fund is expected to contribute in building capability especially in advance technologies and defence start-ups ecosystem.

Defence Minister Rajnath Singh also commented on the proposal to set aside 25% of the defence R&D budget for start-ups and private entities in the financial year 2022-23 as an excellent move in the Union Budget.

Artificial intelligence (AI), geospatial systems, drones, semiconductors, green energy, space energy etc have immense potential to assist sustainable development," the finance minister stated.

She also announced that 5 per cent of Universal Service Obligation (USO) Fund would be provided for R&D and technology upgradation.

"Defence R&D will be opened up for industry, start-ups, and academia, with 25 percent of defence budget earmarked. Private industry will be encouraged to take up design and development of military platforms and equipment in collaboration with DRDO and other organisations through SPV model," She announced.

Government also allocated Rs 60 crore and Rs 23 crore respectively to its key initiatives in R&D -- iDEX and DTIS  in the FY 2022-23.

Another important highlight of the defence budget is the renewed focus on the maritime security. It has been a long pending demand to rationalize the budgetary allocation to the Indian navy, despite its rather successful outlook towards indigenization. 

The Capital Budget of the Indian Navy has been enhanced by 44.53%, with a total allocation of Rs 46,323 crore in FY 2022-23. This increase is aimed at acquisition of new platforms, creation of Op and Strategic Infrastructure, bridging of critical capability gaps and building a credible maritime force for the future.

While at the same time, to boost the Coastal Security, the Capital budget of Indian Coast Guard has been enhanced by 60.24% to Rs 4,246 crore in FY 2022-23 vis-à-vis Rs 2,650 crore in FY 2021-22. This enhancement is for building up of assets such as acquisition of ships & aircraft, augmentation of infrastructure, establishment of coastal security network and building up technical & administrative support structures.