India’s Defense Budget: Brief Note

Since 2019, every year, the Finance Minister of India (Finmin) presents finance budget in the house of representatives (Lok Sabha). Of which, the allocation for defense expenditure remains a prime concern in the face of the intermittent military standoff with China along parts of Line of Actual Control (LAC) and continuing skirmish with Pakistan along with Line of Control (LOC).

In the following list an attempt is made to provide a template for the analysis of defence budget. Percentage of allocation will vary, if not significantly, in the coming years.

  1. Defense allocation in the Union Budget = ~14% of total Budget Expenditure.
  2. Defense Budget (DB) has 2 components: Revenue & Capital.
  3. Revenue Outlay (RO) consists of Salaries & Pensions and stands around 54% of the total DB.
  4. Capital Outlay (CO) consists of expenditure on infrastructure construction work, machinery, and weapon systems, and stands around 28% of the total DB.
  5. Other two essential components of DB are Stores (ammunition, repairs and spares), & Others (administration expenses, expenses on research and development and housing).
  6. Capital Acquisitions under CO has two components: Committed Liabilities & New Schemes.
  7. Share of Army, Air Force, & Navy of the DB is around 64%, 20%, & 14% respectively. The remaining 6% is allocated to R&D organizations.
  8. Budget Expenditure for Army includes — Border Roads Organization, Jammu Kashmir Light Infantry, Rashtriya Rifles, Armed Forces HQ civilians, and other auxiliary forces.
  9. Budget Expenditure for Navy includes Coast Guard.
  10. Army spends around 18% of the budget allocation on modernization (11%) & maintenance (7%). Rest 73% of the budget allocation is spent on salary & pensions.
  11. Navy spends around 46% of the budget allocation on Modernization, and 11% on maintenance. The remaining 27% of the budget allocation is spent on salaries and pensions.
  12. Air Force spends around 52% of the budget allocation on Modernization, and 10% on maintenance. The remaining 30% of the budget allocation is spent on salaries and pensions.
  13. Average time taken to finalize a defence contract is 5 years. Another 5 years is added for the delivery of the systems.

Source: Budget Analysis




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