Army uses Rs 35,000 cr of capital acquisition budget in historic first; 95% of it supports indigenous players

First Post

22-04-2025

This record-breaking usage of funds from the Capital Acquisition Budget in FY24–25 marks a 152% increase from the previous Rs 13,900 crore spent in FY23-24 read more
Indian Army's T-90 Bhishma tanks (front) drive during the Republic Day parade in New Delhi, India. (Photo: Reuters)
The Indian Army has achieved a historic milestone. The service, for the first time, has used Rs 35,000 crore out of the funds earmarked for the purchase or development of long-term assets, particularly military hardware and infrastructure, a source from the Ministry of Defence with knowledge of the development told Firstpost.
This record-breaking utilisation of funds from the Capital Acquisition Budget in the financial year 2024–25 marks a staggering 152 per cent year-on-year increase from the previous Rs 13,900 crore (approximate) spent, making it the highest-ever spending under the Army's capital budget.
STORY CONTINUES BELOW THIS AD
Equally — if not more — impressive is the fact that 95 per cent of this total expenditure was sourced domestically.
When asked about the significance of these historic numbers, the source, who requested anonymity as they were not authorised to speak publicly, said, 'It will most definitely give a boost to the Indian Army's operational preparedness. But what it will also do is boost economic growth through the multiplier effect, since this is quite a big amount. Of course, we expect significant job creation and that the expenditure will attract private investments.'
Strong impact on economy expected
The multiplier effect is an economic concept where an initial increase in spending leads to a larger overall increase in income and economic activity than the original amount spent.
In this context, spending on defence equipment pays workers, stimulates demand for raw materials and services, and boosts related sectors. Those employed in these industries, in turn, spend their earnings on goods and services, further propelling economic activity across the value chain.
Highlighting the breadth of this capital push, the source also shared another critical number: the Indian Army has concluded 26 capital contracts worth Rs 85,000 crore in recent months. Of these, 23 contracts were awarded to domestic vendors.
'The Make in India push is clear. This indigenous manufacturing of defence equipment is likely to create a def-industry ecosystem in the country,' the source noted, referencing the government's long-standing drive to reduce dependence on foreign imports and build an indigenous defence industrial base.
Taken together, the Indian Army's overall expenditure of nearly Rs 1 lakh crore in FY 2024–25— across capital acquisitions and related outlays—is bound to have a positive effect on India's Gross Domestic Product (GDP). It signals a robust shift toward self-reliance, capability enhancement, and economic stimulation through defence spending.
Capital outlay and capital acquisition budget
The terms 'capital acquisition budget' and 'capital outlay' often appear together in defence budgeting, but they are not identical.
Capital outlay is a broad category under the capital head of the Defence Budget. This includes capital acquisition, land acquisition, upgrading infrastructure, and other capital projects like the construction of storage facilities, buildings, roads, airfields, research infrastructure, base development, etc.
STORY CONTINUES BELOW THIS AD
Information regarding capital outlay and expenditure was available in recent documents.
Here's how Indian Army's capital outlay— allocated in Budget, revised mid-year, and actual expenditure— has been from FY2018-19 to FY2022-23. Data Source: Budget expenditure documents, Ministry of Finance, Government of India
Funds for the capital acquisition budget are used specifically for procurement of new weapons and equipment, purchase or development of major platforms (for instance tanks, missiles, aircraft, drones, etc.) and modernisation of the armed forces.
Simply put, the capital acquisition budget is the money set aside specifically for acquiring military hardware, either from Indian or foreign vendors. It excludes infrastructure and construction-related capital works.
Capital acquisition budget and expenditure figures, which are part of capital outlay and spending, are sensitive in nature and, therefore, are not revealed in budget documents.