Defence allocation down to about 1.65 % of GDP, lowest since the 1962 China war

[magudi]

Every finance minister, while presenting the Budget, pays tribute to the military. He announces the defence allocation for the coming year - normally 15-20 per cent higher than the previous year - and then promises that the government will make available whatever more is needed for defending the country.

This year, Finance Minister Arun Jaitley's speech did not make even a token mention of the government's highest chunk of expenditure. The defence allocation, at Rs 2,49,099 crore, was only marginally higher than last year's Budget Estimates of Rs 2,46,727 crore. From this year's Revised Estimates of Rs 2,24,636 crore, the allocation shows a raise of a little more than 10 per cent, well below defence inflation, which normally runs at 15 per cent annually.
Read our full coverage on Union Budget 2016


Defence allocation lowest since 1962 The all-important capital head, under which new equipment is bought, spending has been flat for three years. In 2014-15, capital spending was Rs 81,887 crore; in the Revised Estimates Rs 2015-16, it has dropped to Rs 81,400 crore; and is expected to be only marginally higher at Rs 86,340 crore. That is only if the defence ministry manages to spend its entire capital allocation. In FY 2015-16, it will surrender Rs 13,188 crore, about 14 per cent of the allocation.

Meanwhile, revenue expenditure continues to rise. From Rs 1,43,236 crore in revised estimates of FY 2015-16, the allocation has been raised to Rs 1,62,759 crore, a hike of Rs 19,523 crore, or about 14 per cent. There is an apprehension that even this might not be enough, with the military facing a two-pronged pressure of growing manpower numbers and higher salaries when the Seventh Pay Commission is implemented.

In addition, the government will face financial pressure from implementing the One Rank, One Pension (OROP) award, although pensions are not included in the defence budget. From Rs 60,238 crore allocated for pensions in the Revised Estimates for the current year, FY 2016-17 will see Budget Estimates of Rs 82,333 crore - a rise of over 35 per cent.

Allocations for the three services on account of capital expenditure provide some indication of what contracts might be signed. The army is the big gainer, with its capital allocation up from Rs 18,486 crore to Rs 22,110 crore. This jump suggests the likelihood of artillery gun contracts being concluded, including the purchase of M777 ultralight howitzers from BAE Systems. The navy has been given a marginal raise, which suggests that its flow of new warships is likely to continue smoothly. Significantly, the Indian Air Force (IAF) allocations have been marginally reduced. This suggests the defence ministry is not expecting to sign a contract next year for the Rafale fighter - for which it would have to allocate about Rs 10,000 crore as the signing amount.

In terms of overall government spending, defence will consume about 12.6 per cent of the total spending, approximately the same as the current year's revised estimates. Defence is now down to about 1.65 per cent of gross domestic product, lowest since the 1962 war with China.

This continued downward trend indicates the government does not perceive any pressing national security threats, and has chosen to direct spending to social sectors instead.


Defence allocation down to about 1.65 % of GDP, lowest since the 1962 China war | Business Standard News

 

[magudi]

As a student of Indian strategic affairs for many years, I do not recall a single year when the Finance Minister of India has not mentioned allocations for the defence ministry in his annual budget speech. The absence of any mention of defence in this year's budget makes Arun Jaitley unique in that sense. In his budget proposals for the year 2016-17 in Parliament on Monday, Jaitley did talk of the extra burden that the nation has to bear for the implementation of the Seventh Pay Commission Report and One Rank One Pension (OROP) for the defence forces. But then the fact remains that pensions do not constitute a part of the defence budget.
But what is more surprising is that not only did Jaitley fail to mention the defence ministry in his speech, but his ministry also went one step further in removing the Ministry of Defence (MoD) from the list of "important ministries" in highlighting the budget proposals in its press releases. And this was all the more surprising, given the fact that Jaitley was the first defence minister of this government when it was formed in 2014 after Prime Minister Narendra Modi's mammoth electoral victory. Besides, we have a prime minister who takes great pride otherwise in nationalism and talks of making India a great military power.


However, realistically speaking, one should not be surprised. As this writer had mentioned in the very first article in this series, with Indian GDP growing at about seven percent over last year and given the global recession, no government, let alone the one led by Modi, would have been able to go for a substantial hike in Indian military expenditure. In that sense, the Modi government has kept the past trend of a nominal increase in budgetary allocations for the defence. But in doing that, it has made some changes in the method of allocations this year.

Traditionally, there have been six headings of defence budget: Army, Navy, Air Force, Defence Research and Development Organisation (DRDO), Ordnance Factories (OF) and Civilians (working along with the forces). This time what Jaitley has done is that he has clubbed DRDO, OF and Civilians under the heading 'Defence Misc' and the three services under the heading 'Defence Services'. For the first category, Jaitley has provided Rs 1,18,465.84 crore whereas for the three services he has allocated Rs 2,22,456.14 core. If one adds the two, we have total figure of Rs 3,40,921.98 crore for defence in this year's budget. This is thus an increase of Rs 94,204.98 crore over the last year's budget which stood at Rs 2,46,727 crore. It is a considerable increase in terms of percentage.

However, as has been the case over the last years, this time too the Revenue heading takes the giant share in the budgetary allocations. Under the 'Miscellaneous' heading, the revenue side is Rs. 24,510.23 crore as against the capital front's Rs 11,622. 95 crore. The total allocation thus is Rs. 36133.18 crore, out of which, and this is significant to note, the planned expenditure will be only Rs. 450 crore, the rest of the Rs 3,56,83.18 earmarked for 'non-plan' expenditure. In other words, one can say for research and development, so vital for the success of DRDO, there is not enough money.

As regards the three services, the same is the case. The revenue head is Rs 1,43,869.46 crore and the capital head is Rs 78,586.468 crore. Army, as usual has got the lion's share, followed by the Air Force and the Navy. Army's revenue expenditure stands at Rs 1,02,788.84 crore, out of which as much as Rs 67,721.78 crore will be spent on pay and allowances only. The Navy's revenue head reads Rs.17424.79 crore (salary and allowances will take Rs 5,272 core) and that of the Air Force at Rs 23,655.83 crore (salary and allowances will cost Rs 12,072.53 crore).

Let us see now the capital expenditures so vital for the modernization of our armed forces. Obviously, the expenditure is not enough. The Air Force which is terribly underequipped as far as the fighter squadrons are concerned, has been allotted a meager sum of Rs.17833 crore for acquisitions of new aircraft. And the Navy also has been allocated a negligible sum of Rs.12467 core for adding to its fleet. For other items on capital expenditure for three services, such as land, construction, medium and heavy vehicles and other equipment, there is nothing significant in this budget to mention.

Overall, much against the wishes for their respective capacity enhancement, the three services have been badly let down by the finance minister, particularly when the inflation for military equipment in the global market every year is 12 to 15 percent and there is a sharp fall in the value of the rupee against dollar, the international currency.

Budget 2016: Despite Modi's nationalistic rhetoric, Jaitley has disappointed defence sector - Firstpost

 

[Chinese-Dragon]

Still higher than ours.

China's defence spending is only 1.2% of GDP.

The only reason our defence spending looks so large is because our GDP is large. But in percentage terms we are spending nearly the lowest in the world.

 

[zer_0]

i think all bhakt expected too much from modi

he gave too much to rural areas and cut off defence spending to 1.6%

as a bhakt i am highly disappointed with this defence budget

 

[kublaiyuan]

Still higher than ours.

China's defence spending is only 1.2% of GDP.

The only reason our defence spending looks so large is because our GDP is large. But in percentage terms we are spending nearly the lowest in the world.

CCP is not transparent on most of fronts, as many military/strategic experts estimates CCP's military budget is actually above than 250 USD, thats around 2% of your PRC's gdp. Its more than defense budget of Japan, India, Russia, France combined, staggering figure.

 

[Chinese-Dragon]

CCP is not transparent on most of fronts, as many military/strategic experts estimates CCP's military budget is actually above than 250 USD, thats around 2% of your PRC's gdp. Its more than defense budget of Japan, India, Russia, France combined, staggering figure.

Even if our defence spending was actually 2% of GDP as you say, that's still very low compared to the other major powers, especially America/Russia.

Our defence budget only seems large because our GDP is large. But in percentage terms our defence spending is very low.

It will probably take until 2020 (when our economic/military reforms are mostly complete) before we start to ramp up the percentage spending to similar levels as America/Russia.

 

[Dungeness]

Even if our defence spending was actually 2% of GDP as you say, that's still very low compared to the other major powers, especially America/Russia.

Our defence budget only seems large because our GDP is large. But in percentage terms our defence spending is very low.

It will probably take until 2020 (when our economic/military reforms are mostly complete) before we start to ramp up the percentage spending to similar levels as America/Russia.

It doesn't really matter how big is China's defense budget, it will be eventually spent inside of China anyway. As for the biggest arms importer, the story is quite different.

 

[kaykay]

So capital revenue is 86400 crore this year compared to 81400 crore in 2015..a rise of 5000 crores. Now question is, will we able to spend all this year? last year we used only ~70000 crores.

 

[Razia Sultana]

Still higher than ours.

China's defence spending is only 1.2% of GDP.

The only reason our defence spending looks so large is because our GDP is large. But in percentage terms we are spending nearly the lowest in the world.

India's defence expenditure is 1.65% of her GDP which is quite reasonable. However, India's per capita defence expenditure is far lower as compared to China.

 

[Bheemsen]

Every finance minister, while presenting the Budget, pays tribute to the military. He announces the defence allocation for the coming year - normally 15-20 per cent higher than the previous year - and then promises that the government will make available whatever more is needed for defending the country.

This year, Finance Minister Arun Jaitley's speech did not make even a token mention of the government's highest chunk of expenditure. The defence allocation, at Rs 2,49,099 crore, was only marginally higher than last year's Budget Estimates of Rs 2,46,727 crore. From this year's Revised Estimates of Rs 2,24,636 crore, the allocation shows a raise of a little more than 10 per cent, well below defence inflation, which normally runs at 15 per cent annually.
Read our full coverage on Union Budget 2016


Defence allocation lowest since 1962 The all-important capital head, under which new equipment is bought, spending has been flat for three years. In 2014-15, capital spending was Rs 81,887 crore; in the Revised Estimates Rs 2015-16, it has dropped to Rs 81,400 crore; and is expected to be only marginally higher at Rs 86,340 crore. That is only if the defence ministry manages to spend its entire capital allocation. In FY 2015-16, it will surrender Rs 13,188 crore, about 14 per cent of the allocation.

Meanwhile, revenue expenditure continues to rise. From Rs 1,43,236 crore in revised estimates of FY 2015-16, the allocation has been raised to Rs 1,62,759 crore, a hike of Rs 19,523 crore, or about 14 per cent. There is an apprehension that even this might not be enough, with the military facing a two-pronged pressure of growing manpower numbers and higher salaries when the Seventh Pay Commission is implemented.

In addition, the government will face financial pressure from implementing the One Rank, One Pension (OROP) award, although pensions are not included in the defence budget. From Rs 60,238 crore allocated for pensions in the Revised Estimates for the current year, FY 2016-17 will see Budget Estimates of Rs 82,333 crore - a rise of over 35 per cent.

Allocations for the three services on account of capital expenditure provide some indication of what contracts might be signed. The army is the big gainer, with its capital allocation up from Rs 18,486 crore to Rs 22,110 crore. This jump suggests the likelihood of artillery gun contracts being concluded, including the purchase of M777 ultralight howitzers from BAE Systems. The navy has been given a marginal raise, which suggests that its flow of new warships is likely to continue smoothly. Significantly, the Indian Air Force (IAF) allocations have been marginally reduced. This suggests the defence ministry is not expecting to sign a contract next year for the Rafale fighter - for which it would have to allocate about Rs 10,000 crore as the signing amount.

In terms of overall government spending, defence will consume about 12.6 per cent of the total spending, approximately the same as the current year's revised estimates. Defence is now down to about 1.65 per cent of gross domestic product, lowest since the 1962 war with China.

This continued downward trend indicates the government does not perceive any pressing national security threats, and has chosen to direct spending to social sectors instead.


Defence allocation down to about 1.65 % of GDP, lowest since the 1962 China war | Business Standard News

UPA 3 or worst than this in action playing with national security.

 

[raktaka]

Defence budget is 3.41 Lakh crores which is roughly 51 Billion $.

More importantly Paramilitary forces like BSF etc is outside the Defence buget, so is RAW, Nuclear missiles etc.

So the real Defence budget is much larger than 51 billion $. Should be closer to 60 Billion $.

 

[Ind4Ever]

Pakistan so need not to panic about ' fanci weapons ' we bought and on the verge to acquire ... No more wonder weapon F16s ?

 

[raktaka]

Pakistan so need not to panic about ' fanci weapons ' we bought and on the verge to acquire ... No more wonder weapon F16s ?

Well pakistan's real military budget is almost double its declared Defence budget.

 

[Paksanity]

Pakistan so need not to panic about ' fanci weapons ' we bought and on the verge to acquire ... No more wonder weapon F16s ?

More F-16s might kill you of fear and paranoia . Wouldn't be nice of us, now would it?

On a realistic note however India's defence budget actually increased in real terms. 10% I believe. This is the cost India will have to pay for being the biggest importer and as it so happens trying to use its defence buying as a leverage on sellers. While it hasn't worked as expected, it remains an expensive strategy. When you want to buy from just about everyone, you do end up spending a lot. I expect this cost to keep going up as more and more defence companies look to milk India.

 

[Ind4Ever]

More F-16s might kill you of fear and paranoia . Wouldn't be nice of us, now would it?

On a realistic note however India's defence budget actually increased in real terms. 10% I believe. This is the cost India will have to pay for being the biggest importer and as it so happens trying to use its defence buying as a leverage on sellers. While it hasn't worked as expected, it remains an expensive strategy. When you want to buy from just about everyone, you do end up spending a lot. I expect this cost to keep going up as more and more defence companies look to milk India.

If you think measuring fear factor with F16 one would wonder what could be the confident boost with Su30 MKI the flying beast ? And the total number will exceed 3oo ... Against f16s

And check this out : Who is worried about our new fancy toys. Nice name given by your Pakistan daily by the way

Ambition more than threat driving India’s defence strategy, fancy projects, says Pakistani daily

More F-16s might kill you of fear and paranoia . Wouldn't be nice of us, now would it?

On a realistic note however India's defence budget actually increased in real terms. 10% I believe. This is the cost India will have to pay for being the biggest importer and as it so happens trying to use its defence buying as a leverage on sellers. While it hasn't worked as expected, it remains an expensive strategy. When you want to buy from just about everyone, you do end up spending a lot. I expect this cost to keep going up as more and more defence companies look to milk India.

And I expect this cost of arms procurement spikes to the skies. As we face Pakistan and China together. Hope right sense will prevail in Indian MOD to go for big bang arms deals whatsoever. I believe defence budget should be based on threat perceptions reality than any economical constrain. If not there won't be a sovereign country to spend on .