As the government scrambles to cut costs given the dismal growth rate, defence spending is one of the hardest hit with the projected Budget of Rs 2.03 lakh crore coming up to barely 1.79 per cent of the Gross Domestic Product. This is a record low for India in at least three decades, with the figure dropping considerably from 3.16 per cent of the GDP in 1987.
The expenditure Budget has also revealed that the Defence Ministry suffered a Budget cut of over Rs 14,000 crore last year, a majority of which — over Rs 10,000 crore — had been marked for procurement of new defence systems.
While Finance Minister P Chidambaram promised that extra funds will be made available for the defence of the nation if the need arises, the amount allocated for purchase of new equipment is marked as Rs 86,740 crore, an 8.2 per cent hike from last year.
Modernisation of the naval fleet is set to be the hardest hit, with a cut of over 13 per cent from what was allocated last year, throwing questions on several acquisitions, including new generation conventional submarines.
The modest hike is likely to hit the acquisition of air systems hard, given the large number of aircraft purchase proposals that have been floated by all three forces and the minimal hike proposed under this subhead in the Budget. The biggest being the multi-billion dollar contract to procure 126 new fighter aircraft for which French fighter Rafale has been shortlisted.
The capital Budget for acquisition of new aircraft for the three forces is Rs 33,776 crore, a hike of just over Rs 1,000 crore from the last year. It remains to be seen whether this would cater to the first few payments that India will need to make if it signs the contract for the new generation of fighters. By conservative estimates, the first tranche of payments could come out to be over Rs 5,000 crore. The Army’s much delayed hunt for 197 new light helicopters to replace the Cheetah fleet also seems to be heading for a cancellation with the allocation for aircraft for the land force being cut drastically from Rs 3,052 crore in the last financial to Rs 1527 crore in the Budget, leaving minimal scope for new acquisitions.
Despite the dismal Budget, Defence Minister A K Antony put up a brave front by saying it is the best possible, taking into account the “difficult economic situation both at home and abroad”. “Factoring the current economic scenario, he (Chidambaram) has been fair to the defence sector also by increasing the Budget and assuring that should there be any urgent need in future the same would be provided,” he said.
However, as the records show, not only is this year’s allocation the lowest in over three decades in terms of ratio to the GDP, it is also the lowest in terms of percentage of the total annual government expenditure. This year’s defence budget is 12.23 per cent of the estimated spending of the government in the upcoming financial year, considerably down from the 15.79 per cent in 1999 as well as lower from last year’s 12.97 per cent.
A surprise revelation in the Budget is that the Defence Ministry’s much valued funding for prototype manufacturing of defence systems under the ‘Make’ category of procurement has failed to make a mark. The Budget document indicates that none of the Rs 89 crore earmarked for prototype development was spent, forcing a cut in this year’s allocation to a symbolic Rs 1 crore.