An increase of Rs 7,300 crore from the last years revised estimate of Rs 81,700 crore in the defence budget clearly indicates that the government intends to go ahead with the current modernisation drive.
In his budget speech, finance minister P Chidambaram justified the 7.2% increase keeping in view the enhanced expenditure on modernisation of the armed forces and better pensionary benefits for Defence Personnel Below Officer Rank (PBOR).
The increase puts defence spending at 2.4% of GDP much below the expectations of military-planners who have been campaigning for sustained spending of more than 3% of GDP to speed up the ongoing revamp process.
In order to ensure that the acquisition process goes full steam, the capital outlay in the 2006-07 has seen a jump of 13.25% from last years revised estimates of Rs 33,075 crore to Rs 37,458 crore, an increase of Rs 4,382 crore.
However, almost, over Rs 1,000 crore in the capital outlay remained unspent, a trend which defence minister Pranab Mukherjee managed to control last year.
Defence sources exuded confidence that the amount earmarked for 2006-07 would be fully utilised.