To promote ‘Aatmanirbharta’ in the Defence sector, Finance Minister Nirmala Sitharaman on Tuesday said that 68 per cent of the capital procurement will be earmarked for domestic industry.

The capital is up from 58 per cent last fiscal. She said that this will reduce dependence on imports of defence equipment. The defence budget was increased to ₹5.25-lakh crore for 2022-23 from last year’s allocation of ₹4.78-lakh crore.

“Defence R&D will be opened up for industry, start-ups and academia with 25 per cent of defence R&D budget earmarked. Private industry will be encouraged to take up design and development of military platforms and equipment in collaboration with DRDO and other organisations through SPV model,” Sitharaman said in her speech.

An independent nodal umbrella body will also be set up for meeting wide-ranging testing and certification requirements, she added.

According to analysts and industry veterans, companies like Bharat Forge, Ashok Leyland and Mahindra & Mahindra would benefit who can leverage out of such policies.

‘Self-reliance’

“Aligned with the Prime Minister’s Aatmanirbhar Bharat agenda, the government’s commitment to promoting self-reliance and indigenisation by leveraging Indian industry is once again reinforced with the 68 per cent (enhanced) domestic allocation for defence capital procurement. Earmarking 25 per cent of defence R&D budget for industry, start-ups and academia is a forward-looking measure that will pave way for investments in frontier technologies and capability development,” Baba N Kalyani, Chairman and Managing Director, Bharat Forge, said.

Industry in partnership with DRDO through SPV mode for the development of critical weapon systems and military platforms is a path-breaking reform that will significantly transform the Indian defence eco-system and lead India to be a net-exporter of defence equipment/platforms, he added.

The overall defence budget of ₹5,25,166 crore including ₹1,19,696 crore for defence pensions is an increase of 9.8 per cent compared to last year’s total outlay. The defence budget excluding the pension component stands at ₹4,05,470 crore.

‘Area of growth’

According to the budget documents, an allocation of ₹2,33,000 crore has also been made for revenue expenditure that includes expenses on payment of salaries and maintenance of establishments.

“Opening of defence R&D to private players could be an adjacent area of growth for auto component players in the country. The massive focus this year on logistics infrastructure, additional multi-modal parks, cargo terminals, Vande Bharat trains could help in reducing our logistics costs as well as overall inventory on wheels,” Rajeev Singh, Partner and Automotive Leadership, Deloitte India said.

“A lot of fundamental tech innovation emanates from defence programmes and areas like cybersecurity could become new breeding grounds for start-ups,” Arvind Thakur, Board Member, JK Tech, said.

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