By proposing an audacious 27.69 per cent hike in defence spending for 2004-2005, the government conveyed its intention to go ahead full steam with the equipment modernisation of the armed forces.
The Rs 77,000 crore allocation for defence — up from the revised estimates of Rs 60,300 crore for 2003-04 — is being perceived politically as an attempt by the UPA to wrest the plank of ‘custodians of national security’ from the NDA.
The capital outlay for procurement of weapon systems and platforms has shot up by 98.05 per cent as a consequence. Finance Minister P. Chidambaram has proposed a defence capital expenditure of Rs 33,482.85 crore, up from the revised estimates of Rs 16,906.32 crore for 2003-2004.
"Having regard to the trend of defence capital expenditure in recent years, it has become necessary to make a higher allocation this year," he said and announced tax exemption on family pension in respect of soldiers killed in action.
The capital outlay is 43.48 per cent of the total allocation for defence. In the revised estimates for 2003-04, it was 28.03 per cent. Besides, the NDA government’s interim budget in February had hiked defence funding by 9.45 per cent as against the UPA's 27.69 per cent.
{{/usCountry}}The capital outlay is 43.48 per cent of the total allocation for defence. In the revised estimates for 2003-04, it was 28.03 per cent. Besides, the NDA government’s interim budget in February had hiked defence funding by 9.45 per cent as against the UPA's 27.69 per cent.
{{/usCountry}}With the war chest stuffed, big ticket deals on the horizon include the procurement of six Scorpene submarines, augmentation of artillery firepower and modernisation of the Infantry, and an increase in IAF’s combat squadrons.
At Rs 12,825.66 crore, a three-fold hike has been provided for purchase of aircraft and aero engines. The Army has got Rs 6,521.53 crore for equipment while the Navy has got Rs 4,460.87 for fleet augmentation.
The outlay also caters to outflows for major deals already signed, including the commitments towards Hawk AJTs, Phalcon AWACS and aircraft carrier Gorshkov.
The increase will push defence spending to 2.55 per cent of the GDP, if the budgeted amount is fully spent. The figure for 2003-04 was 2.27 per cent. But India is still significantly below the global average of three per cent. Pakistan and China have defence spends of four and six per cent of their GDPs.
Defence analysts have welcomed the hike but cautioned that the measure will mean little if the government is unable to reverse the trend of large proportions of the defence budget being returned unspent year after year.
“Rs 33,000 crore of defence money has been returned unspent over the last five years,” says Air Vice Marshal (Retd) Kapil Kak. The unspent money has basically impacted modernisation. Over the last three years, an average of 14.3 per cent of the defence budget has been returned unspent.
The Budget Speech was silent on the fate of the Rs 25,000 crore non-lapseable Defence Modernisation Fund instituted by the NDA government. This three-year fund was meant to be a repository of unspent monies from the defence budget. It was intended to address the problem of negotiations for defence buys spilling over beyond the 12-month budget period and commit adequate funds over a three-year time frame.
MEA allocation
The Budget allocation for the Ministry of External Affairs (MEA) has gone up by Rs 231 crores over the plan outlay for last year, with a substantial hike in the amount earmarked for Indian missions abroad. But assistance to Bangladesh, Bhutan and Nepal has dropped.