Know About: Union Budget 2022 Defence Allocation
You would have read multiple news and updates about Union Budget 2022 via various sources. So, we decided to shed some light on the sector that gained the focus light in the Union Budget this year. In Union Budget 2022 Defence Allocation is of Rs. 525,166 crore, which shall further be divided in two parts; i.e. purchase of weapons and armouries and asset purchase, salaries & pensions.
Before we move ahead towards the union budget 2022 sector wise allocation and the business opportunities for MSMEs; let’s first take a glance at the industry insights.
Defence Industry at Glance
India’s defence manufacturing sector has been witnessing a CAGR of 3.9% between 2016 and 2020. The Indian government has set the defence production target at US$ 25.00 billion by 2025 (including US$ 5 billion from exports by 2025). Also, defence exports in the country witnessed strong growth in the last two years.
On other hand, India’s Aerospace & Defence manufacturing sector is a strategically critical sector. It is witnessing rapid growth with capital expenditure expected to be about USD 250 billion over the next 10 years with a major of emphasis on ‘Make in India’. The ‘Make in India’ initiative pushed for self-reliance, aiming for domestic production of 70% of India’s defence needs. The A&D manufacturing sector has been identified as one of the most prominent sectors under “Make in India” to realize the USD 5 Trillion economy by 2024.
Furthermore, Union Budget 2022 Defence Allocation focuses on the new policies to institutionalizing, streamlining and simplifying defence procurement procedures to boost the “Aatmanirbhar Bharat” initiative, by promoting indigenous design, development & manufacturing of defence equipment, platforms, systems and sub-systems.
Union Budget 2022 Defence Allocation
The overall union budget 2022 defence allocation excluding the pension component stands at ₹4,05,470 crore. Whereas, the finance minister allocated ₹1,52,369 crore for capital expenditure in 2022-23 that includes purchasing new weapons, aircraft, warships and other military hardware.
- The capital outlay is an increase of around 10% compared to the revised estimate of ₹1,38,850 crore for 2021-22. The figure at the budget estimate stage was ₹1,35,060 crore.
- The Indian navy has been given an allocation of ₹47,590 crore under capital outlay as against last year’s budgetary outlay of ₹33,253 crore.
- The Indian Air Force has been allocated a total of ₹55,586 crore as the capital outlay as against last year’s ₹53,214 crore. The IAF could spend ₹51,830 crore out of the allocation.
- Defence research and development will be opened up for industry, MSMEs and academia with 25% of the defence R&D budget earmarked for it.
- 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 (special purpose vehicle) model.
How Aerospace & Defence manufacturing sector is benefited
Today, India’s MSMEs are capable of collaborating with foreign OEMs to become a part of their global supply chain. In addition, Aerospace & Defence manufacturing sector are also exploring opportunities with foreign companies as Indian Offset Partners (IOPs) for discharging their offset obligations.
As this is the biggest opportunity for the Aerospace & Defence manufacturing sector in India. The Indian government has decided to extend assistance to MSMEs in terms of manufacturing, design, development and export facilities. The major push is been expected towards the procurement of weapons and military platforms from domestic manufacturers. Where, the 68% of the outlay for procurement will be allocated to domestic industry and 25% of the allocation for research & development for the private sector.
Thus, the Finance Minister of India in union budget 2022 defence allocation has increased compared to previous year.
Future of Aerospace & Defence manufacturing sector
- With 8,643 MSMEs currently working in the defence sector Ministry of Defence is promoting for greater participation of MSMEs. Ministry of defence has set a target to engage with over 16,000 MSMEs in the next three years and is continuously taking steps towards a higher degree of indigenization.
- The MoD (Ministry of Defence) has approved a proposal for the inclusion of iDeX (Innovations for Defence Excellence ) in the defence procurement process which will give boost to MSMEs, individual innovators and budding start-ups.
- Under Make-III (indigenous design, development and manufacture of defence equipment/), MSMEs will have the freedom to form Joint Ventures (JVs) with foreign OEMs for components, equipment or platforms which are not designed indigenously but manufactured in India. The criterion is that the manufacturing be undertaken through association or ToT route with minimum domestically grown content of 60%.
This year’s Union Budget 2022 Defence Allocation will be creating numerous opportunities for new and existing MSMEs in the country. If you are looking for experts and consultants who can guide you through the journey; contact Solution Buggy today! We shall help you connect with the right expert for your requirements.