Indian Military plans $15.95 billion capital spends out of $65.86 billion Defense Budget

Rafale Fighter Jet

New Delhi – The Indian government has allocated US$65.86 billion as the defense budget for 2020-21, which is a hike of only 5.8 percent over the allocation for this sector for the current financial year. There has been a very marginal increase in the capital outlay for defense for 2020-21 as compared to the budget estimates and revised estimates for 2019-20, which will affect several significant projects of the defense forces that are being done for building capabilities against China and Pakistan.

There was also no mention of the defense budget during the budget speech of Finance Minister Nirmala Sitharaman who was earlier the Defence Minister, indicating that the government has prioritized other sectors over the defense.

As part of the $65.86 billion (excluding pension) allocated for defense for 2020-21, $15.95 billion is the capital outlay, and $29.46 billion is the revenue head. Separately $17.97 billion is the allocation for pensions. The capital outlay for the budget estimate for 2019-20 was $14.59 billion. So, there has only been an increase of $1.39 billion in the capital head for 2020-21 as compared to what it was for the current financial year. Similarly, there has only been an increase of $400 million in the capital head as compared to what it was in the revised estimate for 2019-20. The capital outlay for the revised estimate was $15.15 billion.

The bare minimum increase in capital outlay will drastically affect several significant acquisitions of the Army, navy and air force. The Army is already procuring high-end artillery systems such as the M777 ultra-light howitzers, the K-9 Vajra self-propelled gun and the indigenously developed Dhanush for the frontiers with China and Pakistan. The IAF too is also paying for modern weapon systems such as the Rafale fighters and S-400 air defense system.

The merger of funds will also affect the navy, which had earlier approached the government for additional funds amid a severe financial crunch that is forcing it to rationalize and reduce its requirements. Due to the low budget, the navy has had to rework its plan of having 200 warships by 2027. The navy has been pushing to get its share of the defense budget back to the 18 percent it was 2012-13 from 13 percent for the current financial year. The navy has also had to cut down on the numbers planned to be acquired in some projects such as Mine Counter Measure Vessels and P8I maritime reconnaissance aircraft.

The defense budget this time is only a 5.8 percent hike as compared to defense budget estimate of 2019-20, while it is only a 1.9 percent increase over the revised estimate. The hike is much less as compared to the percentage increase in the defense budget for 2019-20, which stood at 7.93 percent.

The revenue head continues to remain more substantial than the capital outlay. This is mainly because of the large number of pays and allowances, including increments that have to be paid for the personnel of the defense forces. The revenue head also takes care of repairs and transport, which are crucial for running a force. For example, in the Army, the revenue to capital ratio is 82:18. For instance, in the Army, the revenue to capital ratio is 82:18. However, this military personal has witnessed only a marginal increase over what it was in budget and revenue estimates of 2019-20.

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