Impetus to Industry for R&D efforts through increased allocation for Make projects.
The Finance Minister of India presented the Union Budget 2025 on 01 Feb 2025, allocating INR6,81,210 crore (~US$ 78.57 billion) to the Ministry of Defense, which is ~13.44% of the total budget and ~1.9% of the GDP.
While capital outlay witnessed an increase of 4.65%, allocation for revenue expenditure was increased by 10.24% over FY 2024-25 (BE) for operational readiness of the armed forces. Support for Agnipath scheme has seen a steep increase by ~84% for FY 2024-25 (BE).
The budget allocation indicated continued focus on indigenous research & development (R&D) and joint procurement of major defense platforms such as aircraft and aeroengines. The allocation towards capital R&D is INR14,924 crore (~US$ 1.72 billion), which is ~13% higher than FY 2024-25 (BE). Further, assistance for prototype development under Make procedure witnessed a ~13.27% increase over FY 2024-25(BE).
Continuing the momentum of ongoing and future reforms, 2025 has been named as the 'Year of Reform' by the Indian Ministry of Defense signalling strong focus on Joint & Integration initiatives amongst the Armed Forces, establishment of the Integrated Theatre Commands and focus on new domains such as Cyber and Space, Artificial Intelligence, Hypersonics and Robotics.
How does the budget impact Defense sector?
- Defense allocation is accounted for under four demands for
grants:
- Demand No 19 – Ministry of Defense (Civil)
- Demand No 20 – Defense services (revenue)
- Demand No 21 – Capital outlay on Defense services
- Demand No 22 – Defense pensions Total Defense expenditure (excluding Defense pensions) (INR crore) 4.65% increase in capital outlay US$78.57 billion (INR6.81L crore) US$20.76 billion (INR1.8L crore) Capital Budget
- The total Defense budget (excluding Defense pensions) for Financial Year (FY) 2025-26 is US$60.16 billion (INR5,20,415 crore)
- Budgetary allocation towards capital outlay stands at US$20.81 billion (INR1,80,000 crore)
- Revenue expenditure allocation stands at US$36.03 billion (INR3,11,732 crore)
Brief on capital expenditure
- Modernization of military forces is mainly influenced by the annual capital allocation in the budget.
- The current capital budget, expressed in INR, has seen an increase of 4.65% over FY 2024-25 (BE)
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