India on Thursday set aside ₹6.21 lakh crore for defence spending in the interim budget for 2024-25, with the defence ministry saying that the critical sector continues to receive the highest allocation among all ministries.

The allocation is 4.72% more than what it was in financial year 2023-24, the ministry said in a statement. To be sure, the defence budget is 4.72% higher than what it was in the budget estimates for 2023-24 but marginally lower (0.37%) than last year’s revised estimates, budget documents show.

In her budget speech, finance minister Nirmala Sitharaman also announced a new scheme to strengthen deep tech in the defence sector.

Read here: India sets aside ₹6.21 lakh crore for defence, announces new scheme for deep tech

This year’s defence budget accounts for 1.89% of the country’s projected gross domestic product (GDP) for 2024-25.

The budget includes a revenue expenditure of ₹2.82 lakh crore, capital outlay of ₹1.72 lakh crore and pension outlay of ₹1.41 lakh crore. The capital outlay for the modernisation of the armed forces is 9.39% higher than last year’s revised estimates and 5.78% more if compared to the budget estimates for 2023-24. India is modernising its military with fighter jets, helicopters, warships, tanks, artillery guns, rockets and missiles, unmanned capabilities and other combat systems.

“In the current geopolitical scenario and with the twin objective of promoting self-reliance and exports, the defence budget has touched ₹6,21,540.85 crore in the FY 2024-25. This comes out to be 13.04% of total budget,” the defence ministry said in the statement.

The enhanced capital outlay is aimed at filling critical capability gaps through modernisation, the statement said, adding that it will also help boost self-reliance in the sector.

“Planned modernisation of the existing Sukhoi-30 fleet along with additional procurement of aircraft, acquisition of advanced engines for MiG-29s, acquisition of C-295 transport aircraft, missile systems, deck-based fighters and submarines will be funded out of the budget,” it said.

India’s defence budget stood at ₹5.93 lakh crore last year, including a capital outlay of ₹1.62 lakh crore. Revised estimates pegged it at ₹6.23 lakh crore, including a capital allocation of ₹1.57 lakh crore.

“A new scheme will be launched for strengthening deep-tech technologies for defence purposes and expediting ‘atmanirbharta,’” finance minister Nirmala Sitharaman said in her Budget speech. Details of the scheme were not immediately available.

The new scheme will propel indigenous innovation and the advancement of cutting-edge technologies such as artificial intelligence, quantum computing, robotics, and cybersecurity, essential for bolstering the country’s defence capabilities and readiness, said defence firm Maritronics India director Venkatesan N.

“We trust that the initiative will offer sufficient funding, incentives, and assistance to the defence sector, particularly to start-ups and MSMEs engaged in these fields,” he added.

Revised estimates in the budget documents show that the armed forces were unable to spend ₹5,372 crore of last year’s capital outlay of ₹1.62 lakh crore. In 2022-23, the armed forces spent around ₹21,000 crore on top of the previous year’s budget allocation, as border tensions with China saw the country make a raft of emergency purchases and sharpen its focus on building infrastructure in forward areas.

The revised estimates for 2023-24 show that the revenue expenditure was ₹28,548 crore more than the allocation. This was mainly on account of pay and allowances, transportation, ex-servicemen contributory health scheme and Rashtriya Rifles expenses.

“A large portion of this year’s allocation will be utilised for procurement through domestic sources to provide locally manufactured next-generation weapon systems to the country which will have a multiplier effect on GDP, create employment, ensure capital formation and provide a stimulus to the domestic economy,” the statement said.

The Border Roads Organisation, which is at the centre of the India’s border infrastructure push, has been given a capital outlay of ₹6,500 crore, which is 30% higher than the allocation for FY 2023-24 and 160% higher than that in FY 2021-22, “in the light of the continued threat perception at the India-China border,” the statement said.

“This indicates the commitment of the government to improve border infrastructure.”