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Defence Offset​

India’s defence budget for 2021 shows significant increase of coverage. Expanding on the country’s growing strategic need for improved border security in light of the prolonged confrontation with China across the northern border and indigenisation of the military manufacturing industry, the defence budget for 2021-2022 offers considerable increase in allocation and distribution of funds.

In terms of numbers, the new budget has recorded about half a percent in capital expenditure allocation, committing a total of $49.7B for 2021 in comparison with 2020’s $47.3B. To be specific, the Indian Air Force (IAF) gets 39.4% of the capital outlay, while the Indian Army and Navy divide the rest. The IAF intends to procure a medium-range air-to-ground weapon system that will be installed on the Rafale jets that were procured last year.

The Indian Army intends to spend most of its share of the budget on manpower, accommodation resources, and equipment. So far, the indigenisation efforts of the government have proven insufficient to fulfil the needs of the country’s Army, and most of the equipment will be imported during 2021.

At the same time, the new defence budget has significantly enhanced its commitment to indigenisation and infrastructure modernisation for the country’s defence industry, supplementing this segment of the budget with an 18.7% increase year-on-year. Additionally, the budget has eliminated the customs duties on components (which were at 2.5% until now), including parts and engines for aircrafts that the Ministry of Defence will need to procure throughout the year.

To encourage military manufacturing indigenisation, the government has previously discussed its intention of spending over $56B on orders with domestic players in the industry.

To sum up, the 2021 defence budget has proven that we are moving in the right direction and our defence priorities are in line with our future needs.

Insights into India’s Defence Budget for fy 2021-2022