India will spend 1.79% of its GDP on defence this fiscal, at a time when experts are arguing it should be more than 3%, seen against the backdrop of China's rising military might.
Finance minister P Chidambaram allocated a budget of Rs. 2,03,672 crore to the armed forces for 2013-14, out of which Rs. 86,741crore has been set aside for modernising capabilities. The capital expenditure for modernisation has gone up by Rs. 17,162 crore.
The 5.3% hike in defence spending over last year's outlay of Rs. 1,93,407 crore — later cut down to Rs. 1,78,503 crore due to the economy being under pressure — has been dubbed inadequate by experts.Security affairs expert Brig Gurmeet Kanwal (retd) said, "It's a loss in real terms, if you factor in inflation and fall of the rupee against dollar, it's abysmally low. With this, army modernisation has come to a standstill."
The hike in defence spending works out to 14.1% over last year's revised estimate of Rs. 1,78,503 crore.
In the run-up to the Union budget, both Chidambaram and defence minister AK Antony had indicated that there would be a squeeze on military spending this fiscal.
Antony had asked the armed forces to prioritise their operational requirements as the Indian economy was not insulated from the global recession, implying some acquisitions could be hit.
"The defence minister has been most understanding and I assure him and the House that constraints will not come in way of providing any additional requirement for the security of the nation," Chidambaram said.
Last year, the finance military had turned down the military's demand for an additional outlay of R45,000 crore over and above the defence outlay of Rs. 1,93,407 crore.
"Factoring in the current economic scenario, he (Chidambaram) has been fair to the defence sector…by increasing the budget and giving an assurance that should there be any urgent need in future the same would be provided," Antony said.
Consultancy firm KPMG India's head of defence advisory Neelu Khatri said, "The subdued increase of 5.3% compared to last year's double digit increase will lead the defence ministry to rationalise procurements."
India's defence spending averaged 1.59 % of the GDP from 1947 to 1962 when our army suffered a humiliating defeat at the hands of the Chinese.