Expanding industry may help in hiking defence budget to 3% of GDP: Defence Secretary
The expanding defence industrial ecosystem in the country, with a spurt in domestic production and growth in exports, could enable the Ministry of Defence (MoD) to seek higher budgetary allocations for modernisation, according to the ministry’s top bureaucrat.
Speaking at a conclave in the Capital, Defence Secretary Rajesh Kumar Singh said that during the 2024-25 fiscal year, the MoD had completely utilised the defence modernisation budget for the first time in the past five years. Further, the ministry signed contracts worth a record of Rs 2 lakh crore during the last financial year, the highest ever achieved and double that of the figures for 2023-24.
“This will ensure that the process of modernisation of the armed forces keeps pace. It would also help the ministry in demanding a higher share in the Union budget, leading up to a minimum defence-to-GDP ratio of 2.5 per cent in five years as a first step and thereafter up to 3 per cent in the medium term," he said.
The defence budget for 2025-26 is 1.9 per cent of the GDP. For a long time, experts have been demanding a higher share of the GDP for defence, keeping in view the security challenges being faced by the country.
India’s current GDP is pegged at USD 4 trillion. The government’s endeavor is to increase it to USD 47 trillion by 2047 through growth in the manufacturing sector, enhancing startup culture, widening the industrial base, and exploiting the spin-off benefits that come from dual use of technology.
Underlining that the entire process of indigenization in the defence sector has had a significant impact over the last decade, the Defence Secretary stated that India has transitioned from being the top importer in 2015 to become one of the top 25 exporters today.
More than 100 Indian companies are now exporting to over 100 countries. The list of products includes missiles such as Brahmos cruise missiles, Pinaka rocket launchers, simulators, armored vehicles, the Dornier aircraft, different types of ships, offshore patrol vessels, etc.
The industry includes 16 defence public sector undertakings, 430 licensed companies, and approximately 16,000 MSMEs. Domestic defence sales increased from Rs 43,746 crore in 2014 to Rs 1,27,000 crore in 2023-24, while exports have grown 30 times in the last ten years to Rs 23,622 crore.
Regarding procurement timelines, the MoD has already, in the year of reforms, slashed the timelines for some of the processes in the procurement cycle, he said. This would save about 69 weeks overall in the process timeline.
In fact, just a day earlier, Chief of the Air Staff, Air Chief Marshal AP Singh, had flagged delays in indigenous defence projects, saying that timelines were an issue.
The Defence Acquisition Procedure 2020, a voluminous document laying out the procurement process in detail, is being revisited to reflect current realities.
“There is a need to shift away from the traditional nomination-based cost-plus procurement focused mostly on the public sector to a more competitive pricing model where both the public and private sectors can compete for orders. This approach is already being implemented for shipbuilding and recently for the Advanced Medium Combat Aircraft project," Singh said.
Measures such as the concept of deemed licensing beyond a certain timeframe to put accountability on concerned government departments, shifting from cost-based pricing to competitive bidding, removing legacy aspects such as product reservation for public sector units, and slashing procurement timelines by weeding out rigid and redundant procedures would lead to a genuine broadening and diversification of the defence industrial base, he added.
India