Giving a push to the domestic Defence industry engaged in production of defence equipment, the Union Finance Minister on Tuesday announced that 68% of the capital procurement budget of the armed forces would be earmarked for the domestic industry.

“Our Government is committed to reducing imports and promoting AtmaNirbharta in equipment for the Armed Forces. 68 per cent of the capital procurement budget will be earmarked for domestic industry in 2022-23, up from 58 per cent in 2021-22,” Finance Minister Nirmala Sitharaman said in the budget speech.

She said the Defence R&D would be opened up for industry, startups and academia with 25 per cent of defence Research and Development budget earmarked for them. Besides, the private industry would also be encouraged to take up design and development of military platforms and equipment in collaboration with DRDO and other organizations through the SPV model.

The Government would also set up an independent nodal umbrella body for meeting wide-ranging testing and certification requirements, the Finance Minister said.

In its budget allocation, the Finance Minister proposed to increase the allocation of Defence budget by more than 9.8 %–up from Rs 4,78,196 crore in 2020-21 to Rs 5,25,166 crore in 2021-22.

The Capital Budget allocation has also been to Rs 1,52,369 crore—an increase of 12.6 %. This is for the second consequent year that capital outlay of the Defence Budget has been increased by about 10 %.

The Society for Indian Defence Manufacturers (SIDM), an industry body of Indian defence manufacturers, also welcomed the steps announced by the finance minister.

The decision to keep 68% of capital outlay of the defence budget for domestic industries would sustain investments and attract fresh capacity creation, the SIDM said in a press statement on its reaction on budget 2021-22.