Union Budget 2023: Will Modi Govt Increase Defense Spending Ahead Of Election Year
February 2023: In the last 5 years, the Narendra Modi government has increased India’s Defense Budget 2017 from Rs. 2.74 lakh crore almost doubling in 2022 to Rs. 5.25 lakh crore, which is an increase of 91.16%.
With the Lok Sabha elections next year and the ongoing China threat on the Ladakh border, the government will want to see efforts on the defense front, and hence experts expect a 10-15% hike in defense spending in the Union Budget 2023-24. .
Defense Expenditure Ahead of Lok Sabha Elections 2024
The Modi government’s 2023 defense budget is expected to be a deciding factor in the upcoming election year 2024.
Due to border tensions with China, the government is likely to continue increasing defense spending to strengthen the country’s military capabilities.
Many expect the Narendra Modi-led Nationalist government to continue increasing defense spending in 2023-24. The defense sector expects FM Sitharaman to increase defense spending by 10-20% for 2023-24.
The government is expected to encourage procurement from defense start-ups and provide tax exemptions to encourage innovation and growth in the sector.
To attract foreign investment, the government can also initiate structural reforms such as the introduction of a defense procurement policy.
As the defense budget is expected to be a major factor in the 2024 elections, the government will closely monitor its commitment to national security and the defense industry.
Defense spending over the years
The total size of Union Budget 2022-23 is Rs. 39.45 lakh crore, of which 13.31% (Rs. 5.25 lakh crore) was allocated to the Ministry of Defence.
In which for defense pension Rs. 1.19 lakh crore included. The defense budget has increased by 9.82% (Rs 46,970 crore) as compared to the budget estimates for 2021-22.
In the last five years, the defense budget has increased from Rs 2.74 lakh crore in 2017 to Rs 5.25 lakh crore in 2022, an increase of 91.16%.
In the 2023 budget, the government is expected to increase the capital budget allocation and implement inflation-proofing measures.
Additionally, industry experts are hoping for increased investment in R&D, increased focus on MSMEs in procurement and defense sector, and expansion of the Trade Receivables Discounting System (TReDs) for the Army, Navy, Air Force and Coast Guard.
Encouraging procurement from defense start-ups
Industry insiders expect Budget 2023 to encourage procurement from defense start-ups with innovative products and allow tax exemptions for the sector to encourage innovation and growth.
The government should provide incentives for companies manufacturing defense equipment within the country, access to defense technology and funding for research and development initiatives.
Structural reforms for increased transparency
To boost growth in the defense sector and attract foreign investment, the government should consider initiating structural reforms such as introducing a defense procurement policy for clear vendor selection and streamlining defense sector regulations for easier licensing for manufacturing defense equipment.
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