The Defence Allocation in the Indian interim budget 2014-15, marks the lowest in over three decades in terms of ratio to the GDP but also the lowest in terms of percentage of the total annual government expenditure. Although touted to be over 10% increase, in actual terms there is no substantial increase considering the factors like inflation, depreciation in value of rupee, against international currencies.
The country's armed forces are in a major modernization drive/process with several acquisitions in the pipeline besides up gradation of infrastructure in the northeast along with China border. The present capital allocation does not seem to do justice, as mounting liabilities accounts for more than 90% of allocations, leaving very little for new procurements. More so when MoD is at the final stages of negotiations on a series of huge procurement contracts including for Fighter jets, Attack Helicopters, heavy-lift choppers, as well as artillery, UAVs/drones and Electronic Warfare (EW) Systems. This clearly indicates the military's long-term equipment planning is based on fundamentally flawed fiscal assumptions.
Although it can be counter argued that we need to take in to consideration poor economic outlook beside growing demand from social sector and the budget being interim. However we cannot ignore the developments in our immediate neighborhood. Despite decline of overall economic growth rate Chinese defence budget reflected the trend of increase in double digits for more than two decades. This year it has reached $ 132 billion- an increase of 12.2% over the last year. Under the prevailing circumstances, it is natural to cause anxiety among its neighbouring countries. Indian defence budget too needs to be increased sufficiently to meet the growing security challenges by modernising the forces, which had been ignored in recent years.
The other relevant aspect which need attention is the procurement planning. The allocation for capital acquisitions is said to be invariably inadequate, but fact of the matter is whatever allocation is made has ever been fully utilized. The surrendered amount over the years could have helped in meeting number of critical requirements. The lassitude in the decision-making is the main cause for surrendering defence acquisitions allocations and need to be attended on priority along with rational allocation.
The final budget for the year to be presented by a new government in July- August 2014 may seek a hike defence budget by 15 to 20 percent, which is necessary to meet requirements of the armed forces modernization programme.