68% capital expenditure for Defence set aside for domestic procurement

New Delhi: In a big boost to the Indian defence manufacturing sector, Finance Minister Nirmala Sitharaman announced on Tuesday that in FY22-23, 68 per cent of the capital expenditure budget for the defence sector will be reserved for domestic procurement.

Presenting the Union Budget 2022-2023 in the Parliament, Sitharaman said: "Our government is committed to reducing imports and promoting Aatmanirbharta (self-reliance) in equipment for the armed forces. A total of 68 per cent of the capital procurement budget for defence will be earmarked for the domestic industry in 2022-23, up from 58 per cent in 2021-22."

The minister said that defence research and development will be opened up for the industry, startups and academia with 25 per cent of defence research and development budget earmarked.

"The private industry will be encouraged to take up design and development of military platforms and equipment in collaboration with the DRDO and other organisations through the SPV model. An independent nodal umbrella body will be set up for meeting wide ranging testing and certification requirements," the minister said.

Reacting to the Budget announcement, the Society of Indian Defence Manufacturing (SIDM) said in a statement: "SIDM welcomes the announcement of setting aside 68 per cent of capital outlay of defence budget for domestic industries, up from 58 per cent in the previous year. This will sustain investments and attract fresh capacity creation."

S.P. Shukla, President, SIDM, said that creation of a nodal body for setting up testing and certification requirements of defence systems and platforms will help the domestic industry through faster processes and cost-efficiency.

"Allocation of 25 per cent of defence R&D budget for startups, academia and private industry is a much-needed reform. We thank the Ministry of Defence and the Ministry of Finance for this major boost to research and innovation," said Shukla.

Hailing the Union Budget, Vice Admiral Paras Nath (Retd), Group President of Crown Group Defence, said, "It is heartening to see that part of the R&D budget has been allocated to the industry, startups and academia. This will be a positive move in particular for startups and MSMEs to have their inhouse R&D."