Syllabus: Security challenges and their management.
Context: Rising Defence Allocation
- Union Budget marks first double-digit rise in defence spending in decades.
- Defence outlay now stands near 2% of GDP, signalling strategic resolve.
- Increase reflects growing geopolitical instability and security pressures.
- Funds require faster utilisation through systemic process reforms.
Key Budget Highlights
- Capital vs Revenue Shift
- Capital expenditure rose over 22%, reversing years of underinvestment.
- Modernisation now prioritised over routine revenue spending.
- Shift indicates long-term military capability focus.
- Service-wise Allocations
- Indian Air Force received nearly 32% budget increase.
- Indian Army saw 30% hike for vehicles and weapons.
- Indian Navy allocation rose marginally by about 3%. Lower naval rise linked to strong indigenisation capacity.
External and Financial Pressures
- Rupee depreciation raises cost of imported defence platforms.
- Aircraft and capital procurements become more expensive.
- However, defence exports reached ₹23,000 crore, up from ₹1,000 crore in 2014.
- Domestic firms produce mobility systems and logistics platforms.
Pension and Structural Cost Concerns
- Defence pensions rose by 6.56% in recent estimates.
- Pension share stands at 21.84% of defence budget.
- Earlier, pensions were outside defence accounting framework.
- Suggestion raised to revisit this earlier budgeting model.
Indigenisation and Procurement Reforms
- 75% of capital procurement reserved for domestic industry.
- Defence production increased by 174% since 2014-15.
- Policy supports private sector participation.
- Yet, procurement processes remain bureaucratically complex.
L-1 Rule Challenges
- Lowest-cost rule disadvantages innovation-driven firms.
- Start-ups struggle transitioning from design to manufacturing.
- Requires assured orders and long-term planning clarity.
Delays and Fund Utilisation Issues
- Project-75 submarine programme delayed since 1997 approval.
- Deliveries expected only by mid-2030s.
- Rafale acquisition conceived in 1990s, delivered post-2019.
- ₹12,500 crore capital funds returned unspent in FY2024-25.
Need for Financial Mechanism Reform
- Proposal to revive Non-Lapsable Defence Modernisation Fund.
- Announced earlier but never operationalised.
- Would prevent modernisation funds from lapsing annually.
Research & Development Gaps
- DRDO and defence research funding increased.
- Research ecosystem remains fragmented.
- Dual-use innovations rarely translate into defence capability.
- India’s R&D spending only 0.66% of GDP.
- Private sector research participation remains limited.
Defence Spending and Development Linkages
- Defence must not be viewed through “guns vs butter” lens.
- Infrastructure projects aid border development.
- Indigenous shipbuilding generates strong employment multipliers.
- Defence investment can support Viksit Bharat growth vision.