Agnipath Scheme 2025 – Know its effect on budget & more details!

Agnipath Scheme Budget 2025: The Agnipath Scheme Budget 2025 has come under scrutiny from different sectors, such as opposition parties and BJP allies, due to its objective of reducing India’s defence salary and pension expenditures. Critics, including military experts and veterans, have raised concerns that the Agnipath Scheme 2025, which aims to decrease pension costs, could potentially undermine combat readiness in the face of escalating regional challenges.

With India’s defence budget feeling the strain of personnel expenses, there is a possibility that the upcoming Union Budget, scheduled for release on July 23, may prioritize modernization efforts to address these issues and uphold operational capabilities.

Agnipath Scheme 2025 : As an overview

Agnipath Scheme, a program designed to reduce India’s growing defense salary and pension expenses, has become a contentious issue for the BJP, facing criticism from both the Opposition and its allies such as the Janata Dal (United) and the Lok Janshakti Party (Ram Vilas) in recent years. Military officers and veterans have raised concerns about the impact of the current defence scheme under review on combat effectiveness and operational efficiency, particularly in light of increasing threats from our neighbor countries such as China and Pakistan.

Admiral K B Singh, a retired Navy chief, has criticized the Agnipath Scheme stating that it appears to be primarily motivated by a desire to reduce the pension bill rather than enhance national security. In recent years, India has seen a notable surge in military spending, leading to its ranking as the fourth largest in the world in terms of defence expenditure as of 2022.

Trend of India’s Defence Budget

Over the past four years, India’s defense budget has steadily risen, climbing from Rs 4.71 lakh crore in 2020 to Rs 5.94 lakh crore in 2023. However, a significant challenge lies in the substantial cost of personnel, including pension, pay, and allowances, which consumes a large portion of the Ministry of Defence’s resources. This has led to a reduction in funds available for modernization efforts and equipment maintenance, affecting the combat readiness of the armed forces. As the Union Budget is set to be presented by Finance Minister Nirmala Sitharaman on July 23, there is keen anticipation regarding the defence allocation, which is expected to maintain its dominant position among various expenditure categories.

Impact of Agnipath Scheme on Budget

The implementation of the Agnipath Scheme has led to a notable change in the defense budget allocation. Prior to the scheme’s launch, the Personnel and Administration (P&A) expenses were more than double the capital outlay in FY2021. However, after the Agnipath Scheme was put into effect in September 2022, the multiplier decreased to 1.79 times in the FY2025 budget estimates. This change was accompanied by a reduction in the proportion of revenue expenditure towards P&A from 53% in FY2023 to 49.6% in FY2025 Budget Estimates, including a decrease in pension allocation from Rs. 1.53 trillion to Rs. 1.41 trillion. The freed-up funds from the scheme implementation have allowed the government to allocate more towards essential capital expenditure, increasing it from Rs. 1.43 trillion to Rs. 1.72 trillion. A study by ORF revealed that the government saves Rs. 1.75 lakh annually per Agniveer compared to a full-time recruit, resulting in a total savings of Rs. 1,054 crore for a batch of 60,000 Agniveers.

Dr. Amit Shah, an Associate Professor at the Special Centre for National Security Studies, believes that while the scheme has led to significant savings on pension and salary expenses, the overall impact on the defense sector economy is minimal given the total defense spending.The study also highlighted that the scheme’s more substantial impact would be on the pension bill in the medium to long term, as pensions constitute a significant portion of the defense budget.

Need of change in the Agnipath Scheme

The Agnipath scheme is in need of changes as the Army is currently facing a shortage of combat-ready soldiers. Approximately 60,000 soldiers retire annually, while the current annual intake of Agniveers is limited to 40,000. As a response to the significant criticism of the Agniveer scheme, Dr. Singh suggests that the government should consider adopting the Indian Army’s proposals for substantial reforms.

These proposals include extending the service tenure from four to eight years, increasing retention rates by 60-70 percent, and raising the induction age for technical services to 23 years. Dr. Singh also notes that some of these modifications may help address concerns about inadequate expertise and enhance the overall effectiveness of the scheme. Under the current scheme, Agniveers are recruited for a four-year term and receive a monthly salary starting at Rs 30,000, which increases to Rs 40,000 by the fourth year.After completing the four-year tenure, an Agniveer receives a one-time Seva Nidhi Package of approximately Rs 12 lakh. Depending on the armed forces’ requirements, permanent enrollment may be offered to Agniveers.

Suggestions for Agnipath Scheme:

Dr. Singh highlights the challenges faced by India’s defence sector in safeguarding its territorial integrity due to Chinese activities at the border. He emphasizes the need for the upcoming Budget to address these challenges by allocating sufficient funds to adapt to the evolving global geopolitical landscape.

The transformation of India from a defence importer to an exporter is a significant development that Dr. Singh believes should be supported by the government’s focus on promoting self-reliance and boosting exports in the defence sector. India’s defense exports surged to an all-time high of Rs 21,083 crore in FY 2023-24, showing a significant rise compared to the previous financial year.

• Moreover, the value of defence production in India has shown consistent growth, reaching approximately Rs 1.27 lakh crore in 2023-24, compared to Rs 1,08,684 crore in FY 2022-23.
• This upward trend in defence production value reflects India’s progress in the defence sector over the past five years, with a growth rate exceeding 60% since 2019-20

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