India Announces Marginal Increase in Defense Budget for Next Fiscal

Inadequate defense budget for next one year has raised serious questions over Narendra Modi’s ambition to modernize military to counter assertive neighbors like Pakistan and China.

New Delhi (Sputnik) — Presenting fourth consecutive annual budget for the nation, India's Minister of Finance Arun Jaitley has allocated an overall $40.31 Billion for the defense service, a marginal increase of 5.7% from previous year. "Marginal increase in defense budget is barely adequate to allow for domestic inflation. It is insufficient to cater for the increase in pay and allowances due to the implementation of the award of the Seventh Pay Commission," says Brig Gurmeet Kanwal (Retd), Senior Fellow at Institute for Defense Studies and Analyses (IDSA).

Despite raising high pitch for defense procurement over the years, once again government did not loosen the purse for defense purchases. Government has allocated only $13 Billion for new equipment, weapons, aircraft, naval warships, and Army vehicles. This is approximately 9.5% more in comparison to previous year's budget. Another worrisome factor is Defense Ministry's inability to consume the last allocation completely. According to the Ministry of Finance, close to one billion dollars allocated for defense purchase remain unutilized.

"There will be a consequent decrease in the capital budget due to implementation of award of the seventh pay commission, leading to further stagnation in military modernization. Also, the nominal increase does not allow for the annual inflation in defense equipment procured from abroad (12 to 15 per cent) and the drop in the value of the rupee against the US dollar," Kanwal added.

India's Ministry of Defense has claimed that it has decided to purchase defense equipment worth $32 Billion in next few years which are currently in the form of "acceptances of necessity" (AoN). In current year itself, India has cleared one of the most expensive purchases in recent years — 36 Rafale aircrafts at the cost of $8.8 Billion which will be delivered by 2019, i.e. substantial amount of $13 Billion capital expenditure for 2017-18 will be spent on Rafale.

This year, India will have to also pay liabilities of Apache attack helicopters and Chinook heavy-lift rotorcraft from the US. Huge money will also be spent on critical military purchase from Russia and Israel.

"Overall, defense preparedness will deteriorate further even as the threats and challenges are continuing to increase," Brig Gurmeet Kanwal said.

India's defense budget is just about 26% of China who is expanding its reach by providing military equipment to Pakistan and Bangladesh.