Defence allocation rises to Rs 2.49 lakh cr

The Budget allocation for the defence zoomed to Rs 2.49 lakh crore in 2016-17 – the highest among all government departments. 

However, the figure was not mentioned by Finance Minister Arun Jaitley in his Budget speech, making him the first in 15 years to skip military allocations. 

The military allocation was later clarified on Twitter by Minister of State for Finance Jayant Sinha. 

“Defence allocation rises to 2.49 lakh crores, an increase of Rs 24,463 crores over last year,” tweeted Sinha. Last year’s revised estimate was Rs 2.24 lakh crore as the defence ministry was unable to spend a large part of its budget.

The enhancement is just about Rs 2300 crore, but when compared against the revised estimate, the increase is much more.

The allocation in 2016-17 for capital expenditure, meant for purchasing new military hardware and payment for existing contracts has been pegged at Rs 86340 crore. This is substantially lower than the allocations under the same head in the last two fiscals, when the defence ministry could not spend the money it received.

The allocation for defence pension, however, has been enhanced this time by more than Rs 22,000 crore as the government is set to implement the one rank one pension scheme for the ex-servicemen. A special allocation of Rs 3600 crore was made in the telecommunications budget to set up an optical fibre network for the defence services.

Notwithstanding the hike, India’s defence expenditure remains just about 2% of the GDP, which is lower than Pakistan and China that spent much more on the military affairs.

As India remains one of the world’s most lucrative arms market, with 14% of global arms import, Jaitley provided some tax sops to spur growth in defence production. The NDA plans big on defence manufacturing as a key component of the ‘Make in India’ programme.

In 2011–15, India’s imports were three times greater than either of its regional rivals: China and Pakistan. 

A major reason for high level of imports is that India’s arms industry has so far largely failed to produce competitive indigenously-designed weapons, says a new report from the Stockholm International Peace Research Institute. Between 2006–10 and 2011–15, imports increased by 90%.