Some even point out that the allocation made in interim budget is comparable with the trend of allocation in the pre-1962 era and it would be disastrous to continue on this course.
By Amit Cowshish
One of the first things the new government at the centre will have to do after assuming power in the coming days is to present the regular budget for the current fiscal. There is an expectation in some quarters that additional funds will be allocated for defence as the outlay envisaged in the interim budget was dictated more by the imperatives of the forthcoming general elections than a rational assessment of the defence needs.
Some even point out that the allocation made in interim budget is comparable with the trend of allocation in the pre-1962 era and it would be disastrous to continue on this course. While it is perfectly legitimate to hold this view, it is unlikely to compel the government to increase the outlay in any substantial measure. That there is unlikely to be any significant increase in the defence outlay is borne out both by the past experience and feasibility of making any significant change in the regular budget vis-à-vis the interim budget presented on 01 February 2019.
Three interim budgets have been presented in the parliament since 2004-05, each of which was followed by presentation of a regular budget. Unlike 2009-10, on the other two occasions the interim and regular budgets were presented by the finance ministers belonging to different ruling coalitions, which makes the inferences drawn from the past experience fairly reliable.
In 2004-05, the United Progressive Alliance (UPA) government increased the defence outlay by Rs 11,000 crore over the outlay envisaged in the interim budget which was presented by the National Democratic Alliance (NDA) government. All this increase was in the capital outlay for the defence services. The interim and regular budgets were presented by the UPA government in 2009-10. This time there was an increase of only Rs 0.25 crore, all of which was for defence pensions.
The history of 2004-05 was repeated in 2014-15 when the regular budget presented by the NDA government saw the defence outlay going up by approximately Rs 6,050 crore, out of which Rs 1,000 crore went into pensions while the remaining amount was allocated for capital expenditure of the armed forces.
It seems no co-incidence that the change of government in 2004-05 and 2014-15 led to additional allocation being made largely under the capital outlay segment of the defence budget. As this is an area that remains in the public gaze all the time, it makes imminent sense for the new government in power to signify its commitment to the defence and security of the country by ‘improving’ upon the performance of the previous government in the matter of allocation of funds for defence.
This view is reinforced by the fact that the only time in the past 15 years that both the interim and regular budgets were presented by the same government in 2009-10, there was an increase of just Rs 0.25 crore in the outlay. The NDA government that came into power in 2009-10 did not have to ‘improve’ upon the commitment of the predecessor government.
If the past is any indication, the best one can expect is a meagre to moderate increase under the capital acquisition segment if there is a change in the ruling dispensation at the centre. There may be some increase in the event there is no change at the centre, if it is true that the interim budget allocation is not adequate even for honouring all the committed liabilities. No government can afford to default on contractual liabilities, which is what the committed liabilities are all about, especially to the foreign vendors.
Even on practical considerations, it does not seem feasible that the new government will be able to make any significant changes in the regular budget. The budget, after all, is the result of a long- drawn exercise which starts several months before the presentation of the budget.
It takes time to assess the revenue the government will be able to generate in a given year, money it will be able to borrow within the constraints set by the Fiscal Responsibility and Budget Management Act, 2003, and to prune the expenditure down to the level of total receipts. This exercise cannot be carried out afresh between the time the new government takes over and presentation of the regular budget.
It cannot also be denied that the government needs to provide for other sectors like health, education, infrastructure development, agriculture, none of which are any the less important for the welfare of the society than the defence of the country.
It seems the ministry of defence will have to make do with Rs 4,31,000 crore allocated to it in the interim budget, which works out to 2.16 per cent of the projected gross domestic product for the current fiscal and 16.56 per cent of the total central government expenditure.
(The author is a former Financial Advisor (Acquisition), Ministry of Defence. Views expressed are personal.)