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Budget promises boost for defence

business Updated: Feb 27, 2008 15:28 IST

Reuters
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India's defence spending is likely to rise by between 8 and 10 per cent in this year's Budget, not enough to please the armed forces, but enough for a gradual modernisation of the world's fourth-largest military, officials and analysts said.

India is emerging as one of the world's biggest arms buyers, and is planning one of its biggest ever arms purchases, a $10 billion deal to buy 126 fighter jets. US Defense Secretary Robert Gates is in India this week trying to push American bids for that deal.

But a painfully slow bureaucratic process means arms purchases will be gradual, not sudden.

Spending plans will also be tempered this year with the government expected to present a Budget on Friday with more money allocated for job creation schemes and healthcare ahead of elections due by next April.

"We expect the defence allocation to be in line with inflation and will not be surprised if it is lower than 10 per cent," a senior defence official told Reuters on Wednesday.

Consumer price inflation ran at 5.51 per cent in 2007.

"The government seems set to present a people's Budget, but we expect it to continue the process of acquiring new weapons systems," he said.

India raised its defence budget by 7.8 per cent to $22 billion for the year ending March 2008 as part of plans to modernise its 1.3-million-strong military.

But it failed to spend around 70 per cent of its $10 billion allocation for capital outlay because of red tape.

"What worries me is like all previous years we are unable to utilise the capital funds, as everyone is taking time in making decisions, which is not good enough," said Ashok Mehta, a retired army general.

Ever since a bribery scandal over the purchase of artillery from Swedish arms makers Bofors AB in 1986 seriously undermined the government of Rajiv Gandhi, defence ministry bureaucrats have been very cautious about signing arms deals.

At least 38 court cases relating to arms agreements are still pending against bureaucrats and military officers, records show.

"The government is afraid of scams and more cases, so arms procurement will remain very slow," Mehta said.

Falling behind China

India spends around less than 2.5 per cent of its gross domestic product (GDP) on its military, a smaller percentage than is believed spent by rivals China and Pakistan.

Military experts say this is not enough.

"Although there has been a critical need to augment inventory, modernisation efforts have not been sustained."

"We are falling short of the required budgetary support which does not augur well at all."

In the past year India has cleared a few pending arms deals, buying 347 T-90s tanks from Russia and six C-130J military transport planes from the US firm Lockheed Martin.

It also inducted eight British advanced jet trainers into its air force, almost 27 years after it began negotiating the deal.

Looking ahead, it plans to spend $30 billion on imports over the next four years to modernise its largely Soviet-era arms.

Even if it does not meet that target, it could still be the largest defence market in Asia, business leaders say.

To overhaul its inventory of ageing fighter aircraft, it wants to buy the 126 new multi-role jets, with the $10 billion outlay likely to be spread over several years.

It also wants to arm its navy with long-range maritime reconnaissance aircraft and add more missiles and artillery to its army.