India to spend 75% of defence capital on procurement from local industries: Defence Minister

Source: The post is based on the article “India to spend 75% of defence capital on procurement from local industries: Defence Minister” published in Indian Express on 16th February 2023

What is the News?

The Government of India will spend 75% of its defence capital in 2023-24 on procurement from the domestic industry. 

How much has been allocated to Defence in Budget 2023-24?

The Finance Minister has enhanced the allocation to India’s defence budget for Fiscal 2023-24 by 13% to INR 5.94 lakh crore up from INR 5.25 lakh crore in fiscal 2022-23.

Of this, INR 1.62 lakh crore has been allocated towards capital expenditure, including the purchase of new weapons, aircraft, warships, and other military equipment. 

This constitutes an increase of 7% over the current fiscal’s INR 1.52 lakh crore but is almost unchanged in absolute terms given an average inflation rate of around 6% over the current fiscal year.

Defence Capital outlay on procurement from the Domestic Industry:

The Defence Ministry will spend 75% of its defence capital in 2023-24 on procurement from the domestic industry up from 68% in 2022-23.

What are the steps taken by the government of India to encourage indigenous defence manufacturing?

The government has taken several policy initiatives in the past few years and brought in reforms to encourage indigenous defence manufacturing. These initiatives include: 

– Notification of four ‘Positive Indigenisation Lists’ for which there would be an embargo on the import beyond the timelines indicated against them; 

– Simplification of Industrial licensing process with longer validity period; 

– Liberalization of Foreign Direct Investment (FDI) policy allowing 74% FDI under automatic route; 

– Launch of Mission DefSpace, Innovations for Defence Excellence (iDEX) scheme;

– Launch of an indigenization portal namely SRIJAN to facilitate indigenisation by Indian Industry including MSMEs; 

– Earmarking of 25% of R&D Budget for Industry-led R&D;

– Establishment of two Defence Industrial Corridors, one each in Uttar Pradesh and Tamil Nadu among others.