India’s military modernisation constrained by fiscal deficit, weakening rupee

The 10 per cent hike in military spending announced in Monday’s interim Budget will not bridge the fast-widening gap in defence capabilities across the Himalayas, with China in two weeks’ time set to unveil a record hike in defence spending even as India’s military modernisation remains constrained by the fiscal deficit and a weakening rupee.

Defence spending was increased to Rs. 2.24 lakh crore ($36.2 billion), a 10 per cent rise from last year. With a weakening rupee, however, the defence budget has actually fallen from last year’s spending in dollar terms, down from $37.5 billion.

This fall comes even as India has belatedly attempted to bridge the widening asymmetry across the 3,488-km-long disputed border to counter China’s massive military and infrastructure modernisation in border areas.

Mountain strike corps

Earlier this year, India formally launched its plan to raise a 50,000-strong mountain strike corps for the northeast dedicated to the China border, with an expected outlay of Rs. 64,000 crore over the next seven years.

The weakening rupee will also likely hamper India’s defence purchases. Unlike China, which has a vast indigenous defence manufacturing industry, India is entirely reliant on imports.

Last year, China hiked its defence spending by 10.7 per cent to 720 billion Yuan ($ 115 billion) — more than three times India’s budget.

The real gap may be far wider, as many analysts believe China vastly understates its defence spending, for instance by excluding swathes of its indigenous defence manufacturing industries by listing them as exclusively serving the space programme.

On March 4, Beijing is expected to announce another substantial hike in defence spending for the coming year, when the government’s annual Parliament session opens, with the People’s Liberation Army pressing for an expanded budget amid recent tensions with Japan over disputed East China Sea islands and to enable the continuing modernisation of the army, air force and navy.

New President Xi Jinping is expected to announce a double-digit hike which would take spending to at least $130 billion.


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