Finance Minister Nirmala Seetharaman's budget on February 1 has made all the right noises regarding defence, with ₹ 5.25 lakh crore being allotted to the Ministry of Defence (MoD), a hike of 10%, and an emphasis on self-reliance in defence manufacturing. While challenges of resource availability persist, the MoD still continues to grab the largest share of the central government’s expenditure.

But beyond the numbers about revenue (₹2.39 lakh crore) and capital allocation (₹1.52 lakh crore) to the MoD, this budget has also demonstrated the Indian government’s long-term view of the China threat through two crucial steps: reinforcing greater budgetary support for the Indian Navy and the border infrastructure. This comes in the backdrop of the prolonged border-standoff with the People’s Liberation Army (PLA) in the Himalayas, which has amplified India’s threat perception. Accordingly, the government has made necessary emergency purchases—from winter clothing to fighter jets—to ensure that the Indian military is geared to face the PLA. The focus on naval capabilities and border infrastructure facilities complement this approach.

Prioritising Indian Navy

With approximately 355 ships and submarines, the PLA Navy has now emerged as the largest navy in the world. In response, India has stepped up its naval activities, including increased patrols in the Indian Ocean. In addition, India’s growing Indo-Pacific ambitions have brought a greater naval presence and engagement with the region.

However, with a fleet of about 130 ships and submarines, one-third in size of the PLA Navy, the strain on the Indian Navy is immense. This is accentuated by delays in shipbuilding and induction, which have substantially affected the pace of naval modernisation. Hence, the Navy has now re-worked its aspiration for a 200-ship fleet to a more realistic goal of a 170-ship fleet.

Partially addressing this problem, the government in this budget has increased the capital allocation for naval modernisation from ₹33.2 thousand crore (FY 2021-22 BE) to ₹47.5 thousand crore (FY 2022-23 BE). This includes ₹29.4 thousand crore for the naval fleet. The funds allocated are more than what the Navy had demanded (₹ 37.6 thousand crore for FY 2021-22) and hopefully, in the subsequent years, the defence ministry will manage to fulfil the Navy's demand.

Besides boosting the Indian naval presence, this greater budgetary allocation will also contribute to the expansion of India’s shipyards as most of the naval expenditure is incurred in shipbuilding. At present, India’s public sector shipyards are manufacturing 48 ships and submarines, making the Indian Navy the most indigenised of the three services. Two significant naval inductions expected this year are the Cochin Shipyard Ltd.-built indigenous aircraft carrier, IAC-1 (or INS Vikrant), and INS Vagir from Mazagon Dock Limited, likely to enter service in the second half of 2022.

Strengthening Northern Borders

Another key dimension of the China challenge has been the border infrastructure. China has determinedly pursued infrastructure build-out to give the PLA a sustained presence on the Line of Actual Control (LAC) in the last two decades. India has been late to this game but is slowly catching up, as seen by its current border infrastructure push with border roads, strategic railway lines, and Advance Landing Grounds (airfields in areas closer to the LAC).

The Border Roads Organisation (BRO), the primary agency to construct border roads along the LAC, has received a substantial hike annually in the last few budgets. Keeping up with that trend, this year, the BRO has been allocated Rs. 3500 crore, 40% more than the FY 2021-22 BE of Rs. 2500 crore. This sustained enhanced allocation has ensured that the BRO has completed many long-pending projects, including the Atal Tunnel in Rohtang and Umling La pass in Ladakh.

In addition, Sitharaman also announced the “ Vibrant Villages Program” that will focus on developing remote villages on the LAC. To be administered by the Ministry of Home Affairs, development activities under this program will include constructing infrastructure, housing, tourist centres, road connectivity projects, provisioning for renewable energy, expanding access to satellite television, and support for livelihood generation. This program is vital due to the glaring difference in living standards in the villages on the Indian and Chinese sides of the LAC. China’s white paper on Tibet has noted that between 2017 and 2020, the Chinese government implemented a host of schemes to ensure better access to housing, electricity, roads, and the internet.

These initiatives on naval modernisation and border development will yield the desired outcome only if India sustains them with the required budgetary support. While the government has to bear the cost of naval modernisation, it can engage the private sector to defray the border development costs by potentially through the corporate social responsibility framework.