Finance Minister Arun Jaitley has increased the defence budget by a sum of 16,000 crore.
Jaitley while presenting the Union Budget for 2017-2018 announced that Rs. 2,74,114 crore is allocated for defence expenditure, excluding pension. This includes Rs 86,000 crores for defence capital. The defence budget for the year 2016-2017 was Rs. 2,58, 589 crore.
As per the figures released by the Ministry of Defence, there is a growth of six percent over the budget estimates (Rs 2, 58,589.32 crore) and 5.6 percent over Revised Estimates (Rs. 2, 59, 480.13 crore) respectively for the financial year 2016-17.
Out of Rs. 2, 74,114.12 crore allocated for the financial year 2017-18, Rs. 1, 82, 534.42 crore has been allocated for revenue (net) expenditure and Rs. 91, 579.70 crore for capital expenditure. The capital expenditure includes modernization related to expenditure.
For Defence Pension that is over and above the outlay mentioned above, an amount of Rs. 85, 740 crore has been provided in Budget Estimate 2017-18. This is 4.13 percent above the allocation (BE) during the year 2016-17.
The current budget in real terms represents a decrease as it will have to factor in inflation and the rising costs of equipments. Reduction in the capital budget has its affect on the procurement of the hardwares for the armed forces, Army, Navy and the Air Force. Capital Expenditure is utilized in procuring hardware such as tanks, fighters, radars, missiles, ships, and submarines, to name a few.
Laxman Behera, Research Fellow, Institute for Defence Studies and Analyses, expressed disappointment with the amount of funds allocated in the defence budget.
He told ANI, "There is a bit of disappointment because if you look at the government's revenue increases, it has gone at a very good pace, around 16 percent to 17 percent increase in the overall revenue of the central government. But the defence budget has increased by a mere five percent and much of the increase is in the revenue segment and not in the capital segment and capital expenditure is very vital for the modernization of the defence forces. That is why I would say there is a bit of disappointment for the armed forces."
Elaborating further, Behera estimated the Capital Expenditure to be around Rs. 84,000 crore and said that the Finance Minister has interestingly mentioned a figure of Rs. 2,74,114 crore excluding pension for the defence forces but that is not the figure which is the defence budget. Defence budget is actually, what we call defence budget, amounts less which my calculation is Rs. 262, 390 crores and in terms of growth it is mere five percent.
The capital expenditure has not actually grown as much as it was the previous year. It was Rs. 83,340 crore in 2016-17 and it is around Rs. 84,000 crore.
"And if you look at the modernization expenditure, which is part of the capital expenditure has actually declined, although marginally. This is the trend which we see over the last several years that although defence budget is increasing marginally but the capital expenditure, particularly the modernization is either declining or is stagnant which is a cause of serious concern and which needs to be addressed," said Behera.
The primary reason is due to the increase in manpower cost, salary and pension. So, there is an obvious pressure on budget but at the same time the government has to allocate extra resources because there is a big void in our preparedness.
"Apart from modernization, the stores expenditure which is basically used for sustaining the existing equipment is also under pressure. So, I see a sign of concern because modernization and stores budget is not increasing and that government has to think seriously," he added.
The budget comes at a time when the three services are in the last stages of negotiations for multi-billion dollar deals for Rafale fighter jets, Apache, Chinook and Kamov helicopters and the M777 light weight howitzers.
The Union Budget envisaged a total outlay of Rs 21, 46,735 crore out of this Rs 2, 74,114.12 crore has been earmarked for defence. This accounts for 12.77 percent of the total Central Government expenditure for the year 2017-18.