Budget 2024: Uptick in share of capital expenditure in defence spends

Higher allocations seen in latest Union Budget

A slightly larger share of the defence budget has been allocated towards capital expenditure than has been seen in recent years.

Capital expenditure is broadly the purchase or creation of a long-term asset such as new equipment. Revenue expenditure covers expenses that recur every year, like money spent on salaries. The share of capital expenditure is now at Rs 1.8 trillion or 29.3 per cent of the total budget, compared to 26.9 per cent previously, according to an analysis of budget figures collated by the tracker Centre for Monitoring Indian Economy (CMIE). This is the highest over the last eleven years. The previous high was in 2013-14 when 31.6 per cent of the defence budget was devoted to capital expenditure (see chart).

“Earmarking of Rs 1,05,518.43 crore for domestic capital procurement will provide further impetus to Atmanibharta… Border Roads have been given a 30 per cent increase in allocation over the last budget under the capital head. This allocation of Rs 6,500 crore to BRO will further accelerate our Border Infrastructure,” Defence Minister Rajnath Singh said in a social media statement.

Over Rs 500 crore has also been allocated to a scheme to fund technological solutions given by startups, micro, small, and medium enterprises, and innovators, and propel the startup ecosystem in defence industries, he added in the statement.

The increase comes amid rising tensions with China in recent years.

Partnerships with potential allies can help meet some of India’s defence needs but modernisation remains an important imperative, according to a February 2023 Observer Research Foundation note on the defence budget for the year from author Laxman Behera.

“China spends massive amounts on its military, and India is not in a position to match Beijing’s defence spending dollar-to-dollar in the foreseeable future....While such coalitions are indeed helpful, it would nonetheless be in India’s interest to keep its defence spending on a higher growth path to narrow the disparity with China. India has to not only increase its defence spending...(in)... a sustained manner, but ensure that greater proportions of the additional allocations are devoted to the modernisation of the defence forces,” it said.