The allocation for defence in the Union budget presented by Finance Minister Nirmala Sitharaman on Saturday saw a marginal hike compared to last year which does not cater to the inflation and currency exchange fluctuations. The allocation for 2020-21 stands at ₹3.37lakh crore excluding defence pensions which stood at ₹1.34 lakh crore.
(Red denotes a fall in expenditure, while green is for an increase. The darker the red, the more the amount allocated has decreased; the darker the green, the more the amount allocated has increased)
The total allocation for defence in 2020-21 including pensions stands at ₹4.71 lakh crore compared to ₹4.31 lakh crore last year. There is a steep rise in defence pensions, 13.5%, from ₹1.18 lakh crore in revised estimates to ₹1.33 lakh crore. Excluding defence pensions, the allocation this year is ₹3.37 lakh crore which is 5.67% higher compared to the budget estimate of last year and just 1.8% higher compared to the revised estimates of 2019-20 which was ₹3.31 lakh crore.
The hike doesn't not fully cover inflation and currency fluctuations and is meagre considering the mega defence tenders recently signed and several lined up as part of military modernisation. Also, this doesn’t even cover the revenue expenditure and committed liabilities in some cases as was flagged by the services after the interim budget last year.
“National security is the top priority of this government,” Ms. Sitharaman said in her budget speech but there was no mention of the defence allocation in her over two hour long budget speech. The defence spending for 2020-21, excluding pensions, accounts for 1.5% of the country’s Gross Domestic Product (GDP).
The hike is a worrysome scenario for the much needed military modernisation as India has signed several big ticket defence deals in the last few years and the current capital allocation doesn’t even cater for payments to the committed liabilities. Even last year, the services had to roll on some of their committed liabilities and they would further accumulate this year.
The Indian Air Force (IAF) got 38% of the ₹1.13 lakh crore capital component which comes to ₹43,281 crore, but in real terms, the capital allocation for the IAF has gone down from the revised estimates of 2019-20 which was ₹44,869 crore. In comparison, last year, the IAF had committed liabilities, payments for deals already signed for, of over ₹47,000 crore which was more than its entire capital allocation even then. The IAF has signed several major deals including 36 Rafale jets from France, S-400 air defence systems from Russia, Apache attack helicopters and Chinook heavy lift helicopters from the US among others.
The resource constraint is likely to delay several multi-billion dollar deals for fighter jets, submarines and helicopters being processed through the Strategic Partnership model.
Commenting on the defence allocation, Commodore C. Uday Bhaskar (Retd), Director of Society for Policy Studies, said two signals can be inferred from the budget. One emerges from the fact that the Finance Minister did not even mention defence allocation in her speech, which suggests that national security is clearly not a high priority, he told The Hindu .
“Second, the inventory modernisation and acquisition programs of the armed forces will be on hold for another year — and it is evident that despite all the earnest rhetoric, enhancing military capability is not on the radar for Modi 2.0 due to other considerations including the budget deficit. This will have an adverse bearing on the trans-border military capability of India which is in dire need of fiscal infusion, but this is now on hold,” he said.
Finance Commission
The Services and the Defence Ministry have made a representation to the Finance Commission for additional allocation to meet the shortfall. In its interim report, the Commission observed that there is merit in ensuring a predictable and stable flow of funds for defence and internal security and this will receive appropriate consideration in their final report.
The interim report said that to generate additional resources, the Defence Ministry has proposed disinvestment of defence public sector undertakings, levying of a cess, monetisation of surplus land and other assets, as well as the issuance of tax-free defence bonds and the creation of a non-lapsable fund. Finance Commission will set up an expert group to examine proposals, it added.+
The total allocation for defence in 2020-21 including pensions stands at ₹4.71 lakh crore compared to ₹4.31 lakh crore last year.
Of the ₹4.71 lakh crore, ₹3.37lakh crore is revenue and capital allocation and defence pensions is ₹1.34 lakh crore.
There is a steep rise in defence pensions year on year from ₹1.18 lakh crore from revised estimate to ₹1.33 lakh crore this year.
The allocation of ₹3.37 lakh crore is 5.67% higher compared to the budget estimate of last year which was ₹3.18lakh crore and just 1.8% higher compared to the revised estimates of 2019-20 which was ₹3.31 lakh crore.
The defence spending for 2020-21, excluding pensions, accounts for 1.5% of the country's Gross Domestic Product (GDP), the lowest since 1962 war.
