Budget 2019-20: The government already has a number of obligations and responsibilities in the defence sector, for instance paying for the 36 Rafale fighter, S-400 SAM systems, helicopters for the Army and Navy.
By Debajit Sarkar
Union Budget 2019 India: India cannot afford to lower its military readiness given its unpredictable security environment and the altering nature of warfare. Consequently, India allocates hundreds of crores of rupees annually to support its national security. The last five years saw a record number of reforms to augment defence preparation. Now that the Modi government has returned to the office again, defence reforms are being deepened in order to meet India’s security threats effectively.
The government already has a number of obligations and responsibilities in the defence sector, for instance paying for the 36 Rafale fighter, S-400 SAM systems, helicopters for the Army and Navy. Furthermore, earlier this month the Ministry of Defence (MoD) issued Request for Proposals (RFPs) to shipyards for 35 ships/vessels worth ₹15,000 crore. This includes 6 Next-Gen Missile Vessels, 8 Fast Patrol Vessels, 12 Air Cushion Vessels and 8 Missile/Ammo Barges
According to the Parliamentary Committee on Defence projections and allocations made under Capital & Revenue heads for 2018-2019 are as follows:
In the Union Budget 2019 that was presented by finance minister Nirmala Sitharaman today, the financial outlay for the defence sector was by and large constant with the Interim Budget presented in February this year. Therefore, the Interim Budget had already provided a broad direction of the likely spending on national defence in the ensuing fiscal year. The main driver of revenue growth has been the manpower cost of the Army, Navy and Air Force. Manpower cost has added 42 per cent to the revenue expenditure increase and 25 per cent to the total defence budget increase. Within capital expenditure, the main increase component has been the acquisition budget. Its impact on the increase in capital expenditure and the total defence budget is 78 and 32 per cent, respectively.
Despite the rise in global crude oil prices, ongoing global trade tensions and a strained national banking system, expectations are that the Indian economy is poised to grow at nearly 7 per cent in real terms in 2019-20. However, with fiscal consolidation not making as much progress as expected the defence budget has been subject to a moderate increase.
Some of the major features of this year’s defence budget are:
> Out of Rs 3,18,931.22 crore allocated for the Financial Year 2019-20, Rs 2,10,682.42 crore has been allocated for Revenue (Net) expenditure and Rs 1,08,248.80 crore allocated for Capital expenditure for the Defence Services and the Organizations /Departments under the Ministry of Defence. The amount of Rs 1,08,248.80 crore allocated for Capital expenditure, includes modernization related expenditure. The Capital Allocation of Ministry of Defence under BE 2019-20 is 31.97 per cent of the total Central Government Capital Expenditure, which is Rs 3,38,569 crore, however, amounts for revenue, civil and capital expenses have been revised.
> In terms of the amount allocated, there is an increase of 0.01 per cent in the defence budget in comparison to the interim budget.
> The defence allocation is 10.95 per cent of the total Union Budget of Rs 27.86 lakh crore, which is an increase of 11 basis points from what had been allocated in the interim budget
> Revenue budget has increased by Rs. 3,416 crores to Rs. 2.01 lakh crore. Capital budget has been pegged at Rs. 1.03 lakh crore.
> Imported defence items that are not manufactured in India will now be exempted from customs tax. Earlier customs duty paid by India’s armed forces for such imports were reimbursed by the Central Government.
> Assurance that extra funds would be pooled in if there is a major requirement
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To provide more impetus to the modernization of the armed forces, there is a need to boost defence spending. And while getting it done, there is a grander need to create resources by optimally managing existing defence assets and decreasing the expenses of the MoD. Also, the defence industry is a strategic industry, and its growth is in the greater interest of the nation. Keeping this in mind the MoD can consider under the “Buy India” clause, to allow only India based companies to bid for defence contracts. Currently, the MoD is battling a shortage of funds and one of the major focus of the Finance Minister in this year’s budget was to optimize its expenses. It is quite possible that going forward in the next 4 years, a substantial increase in the defence budget will be brought about to fully meet the needs of modernization.
(Author is an independent strategic analyst. Views are personal)