India’s defence budget continues to be pegged at less than 2.0 per cent of the country’s GDP despite the recommendations of successive Standing Committees on Defence in India’s Parliament that it should be at least 3.00 per cent if the emerging threats and challenges are to successfully countered.

In his budget speech on February 28, 2011, Finance Minister Pranab Mukherjee set aside Rs 1,64,425 crore (US$ 36 billion) for defence during the next financial year (FY 2011-12). Though the present allocation shows an increase of 11.59 per cent over the budgetary estimates for FY 2010-11 and 8.47 per cent over the revised estimates, it is barely adequate to neutralise the annual rate of inflation. Inflation in weapons, ammunition and defence equipment is usually much higher than domestic inflation.

Of the total allocation for defence, on the revenue account the army will get Rs 64,250 crore, the navy Rs 10,590 crore, the air force Rs 15,93 billion and the Defence Research and Development Organisation (DRDO) Rs 5,624 crore. The total revenue expenditure planned for the year is Rs 95,216 crore (US$ 21 billion, 58 per cent of the budget). The remaining amount of Rs 69,199 crore (US$ 15 billion, 13.75 per cent increase, 42 per cent of the budget) has been allotted on the capital account for the acquisition of modern weapon systems, including 126 multi-mission, medium-range combat aircraft, C-17 Globemaster heavy lift aircraft, 197 light helicopters, 145 Ultra-light Howitzers and C-17 heavy-lift aircraft. It is well known that India plans to spend approximately US$ 100 billion over 10 years on defence modernisation.

Giving his reaction to the Finance Minister’s budget speech, Defence Minister A K Antony said, “We welcome it as our concerns have been by and large addressed and the Finance Minister has stated that if we have any fresh requirements, they would be made up without any difficulty.” However, while the reactions of the armed forces are not known, they are unlikely to be satisfied as their plans for modernisation have been stymied year after year by the lack of committed budgetary support. The 11th Defence Plan, which will enter its fifth and final year on April 1st, has not yet been accorded approval in principle by the government and, therefore, lacks committed budgetary support. The only silver lining on the horizon is that the funds earmarked on the capital account for FY 2010-11 have been fully spent by the government for the first time in many years.

In addition to the defence budget, the government has also earmarked adequate resources in the annual budget of the Ministry of Home Affairs (MHA) for homeland or internal security. A portion of these funds will be utilised for setting up a National Intelligence Grid and the National Counter-terrorism Centre – measures which are considered necessary consequent to the Mumbai terror strikes in November 2008. Also, funds for the modernisation of central police and para-military forces will be provided from the budget of the MHA.

This year’s defence budget is 1.84 per cent of the projected GDP and 13.07 per cent of the total Central government expenditure. China’s official defence expenditure is US$ 78 billion (3.5 per cent of its GDP) while its actual expenditure is well above US$ 100 billion. The U.S. defence expenditure was US$ 530 billion in fiscal year 2010, excluding funds allotted for the wars in Afghanistan and Iraq. In fact, the 13th Finance Commission has recommended that the nation’s defence expenditure should progressively come down to 1.76 per cent of the GDP by 2014-15. Quite clearly the Finance Ministry appears to have decided to pay heed to this advice.