Defence budget unchanged at Rs 3.18 lakh crore

Union Finance Minister Nirmala Sitharaman, who held the defence portfolio till a month back in the previous government, didn't increase the defence budget at all fixing it at Rs 3.18 lakh crore, as announced in the interim budget in February.

Her two hours long speech didn't have a word on the defence allocation—the highest outgo in the government expenditure—days after the BJP government was accused of “obsession with security” by the debutant Trinamool Congress MP Mohua Moitra in the Lok Sabha.

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The capital budget for defence, meant to purchase new military hardware, stands at Rs 1.03 lakh crore – a hike of Rs 9,412 crore from last fiscal's capital outlay. Most of the allocations are, however, spent on “committed liabilities” leaving little for new purchases.

The only concession for the defence sector is waiving off basic customs duty on the import of defence equipment that are not manufactured in India.

This exemption, however, is notional in nature because at the moment the government reimburses the armed forces, which pay the customs duty. At the most, the proposed move would help the defence manufacturing companies save some of the paper-works.

The government's biggest worry on an increasing salary bill in the defence sector continues. Sitharaman earmarked a revenue budget of Rs 2.01 lakh crore for the defence services, out of which nearly 60% would be spent on the salary bill.

In addition, there is a separate allocation of Rs 1.12 lakh crore on defence pension because the pension expenditure too shot up following the implementation of the one-rank-one-pension scheme by the Narendra Modi government.

In terms of GDP, the allocation on defence is one of the lowest in the history (1.45%) that goes contrary to the military's persisted demand of a sizeable rise in the allocation to improve the infrastructure and purchase new arms and ammunition to take on the enemy.

Sitharaman, however, asserted that the defence budget had substantially been hiked, comparing it with the allocations made in 2018-19. She didn't bring the interim budget, presented by then Finance Minister Piyush Goyal in February, into the picture at all.

“The government allocated Rs 1,12,079 crore for defence pensions. Along with the defence budget, the total defence allocation comes to around Rs. 4,31,010 crore and accounts for 15.47% of the total central government expenditure for coming fiscal," the Finance Minister said at a media briefing after the budget presentation.