Union Budget 2025: Meagre hike for new procurements as MoD fails to utilise capital head in earlier allocation

Defence Ministry's budget allocation sees a 4.65% increase to ₹1.8 lakh crore, with focus on modernization and procurement.

The capital allocation for the Defence Ministry saw a meagre 4.65% increase to ₹1.8 lakh crore from the previous estimates, important considering the inflation and the currency fluctuations, as the armed forces are likely to return ₹12,500 crore from the budget estimates to the revised estimates of 2024-25. The total allocation to the Defence Ministry for 2025-26 stood at ₹6,81,219 crore which represents a year on year increase of 9.53% and constitutes 13.45% of the Union Budget, the highest among the Ministries.

Of the ₹6,81,219.27 crore allocation for the next fiscal, revenue allocation was ₹3,11,732.30 crore, capital was ₹1.8 lakh crore, defence pensions stood at ₹1.6 lakh crore, and civil - ₹28,682.97 crore.

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“Of the ₹1.8 lakh crore, ₹1,48,722.80 crore is planned to be spent on capital acquisition, termed as modernisation budget of the Armed Forces and remaining ₹31,277.20 crore is for capital expenditure on Research & Development and creation of infrastructural assets across the country,” the Defence Ministry said. Of the total capital allocation, ₹1.12 lakh crore earmarked for procurement from domestic industries.

The money to be returned by Service highlights the long drawn and often protracted delays in the defence procurement process. Before March 31, two major defence deals are set to be concluded with France, 26 Rafale-M fighter jets to operate from aircraft carriers and three more Scorpene-class conventional submarines, together to cost over $10bn. The deals are likely to be concluded around the visit of prime Minister Narendra Modi’s visit to Paris on February 10-11.

There are few other deals likely to be concluded this fiscal including the one for 307 Advanced Towed Artillery Gun Systems for the Army estimated at ₹8,000 crore.

The allocation for the Indian Coast Guard (ICG) saw a significant jump year on year, 26.5% overall and even higher 43% in the capital budget. “This increase is primarily in line with the focus of the Government on capability development of ICG and equipping them with modern equipment. The ICG not only strengthens coastal security, but also provides assistance to neighbouring countries and commercial ships during emergency through faster response,” the Ministry said on the increase for the ICG.