India hikes defence spending by 17 percent

Indian govt increases defence spending to 1.93 trillion rupees ($40 billion) for the financial year to March 31, 2013.

NEW DELHI: India on Friday increased its military spending by 17 per cent to $41 billion in the Union Budget 2012-13. Of this expenditure, $17.5 billion will be reserved for procuring new equipment.

The hike comes a year after India had increased its budget expenses by 11 per cent. A cumulative outlook over the past two years shows that India has increased military spending by a third.

The move is also seen as a way to counter China’s 11 per cent defence spending increase just a few days ago.

Finance Minister Pranab Mukherjee, presenting the general budget for the next fiscal in the Lok Sabha, said this allocation was based on the present needs projected by the defence ministry and that further needs for national security would be met.

The capital expenditure of the armed forces – that which goes towards purchase of equipment – was set at around $ 17 billion, a 15.7 per cent hike from last year's capital allocation. 70 per cent of this amount will go towards servicing contracts already signed. The rest will be reserved for the procurement of new equipment, including procuring new aircraft from French company Rafale.

The revenue component of the Defence budget amounted to $21.67 billion. This part of the budget that goes towards paying salaries, was $18.15 billion in the budget estimate, but was $ 19.9 billion in the Revised Estimates, suggesting the services had overspent under this head.

Commenting on the ballooning revenue aspect of the defence budget, Dr Laxman Behera of the Institute of Defence Studies and Analyses said: “Pay and allowances are obligatory in nature and the government has little control over their growth, given the mandatory increase in annual pay and dearness allowances. Moreover, most of today’s pay and allowances constitute tomorrow’s defence pensions, over which also the government has little control. The uncontrollable growth in these two components have great implication on other aspects of the defence budget.”

On the capital side, India is on the verge of signing a USD $20 billion contract for 126 Rafale medium multirole combat aircraft, apart from a USD 600 million deal for 75 Pilatus PC-7 basic trainer for its air force.

However, the outlays indicate that the final go-ahead for this expenditure might be rolled over to the next financial year. Several artillery purchases for its army are also due. In particular, the proposal to buy 145 ultra-light howitzers from the US under a government-to-government sale is also progressing.