Amid the prolonged border tensions with China, it is highly anticipated that the government might boost defence spending in Budget 2021.
In the previous budget, the defence sector had received a marginal increase of 1.82 per cent in fund allocation. Last year, the government allocated Rs 4,71,378 crore to the defence sector, including expenditure for salaries of armed forces and civilians, pensions, modernisation of armed forces, among others.
However, the pension bill was almost $18 billion out of the total of $63 billion.
If pension was removed, the budget allocation shrunk to Rs 3.37 lakh crore, which forced armed services to cut back on procurement and modernisation plans.
In October 2020, the government removed expenditure curbs on defence spending, but some big-ticket projects are still pending.
The size of the Defence Industry, including Aerospace and Naval Shipbuilding Industry, is currently estimated to be about Rs 80,000 crore (2019-20). While the contribution of the Public Sector is estimated to be Rs 63,000 crores, the share of the Private Sector has steadily grown to Rs 17,000 crore over the years.
The government is aiming to achieve a turnover of Rs 1,75,000 crore (US$ 25 billion) including the export of Rs 35,000 crore (US$ 5 billion) in Aerospace and Defence goods and services by 2025.
It is also eyeing to reduce dependence on imports and take forward "Make in India" initiatives. In addition to this, the government is planning to create an environment that encourages R&D, rewards innovation, creates Indian IP ownership, and promotes a robust and self-reliant defence industry.
As per the latest list of the 25 largest arms companies in the world released by the Stockholm International Peace Research Institute, three Chinese state-owned companies have dominated the top-10 ranks. China is now the world's fifth-largest arms exporter behind the US, Russia, France, and Germany.
In contrast to this, India is the world's second-largest arms importer despite being the third-largest military spender. This means it is imperative that focused attention is laid on the promotion of exports of Indian defence products.