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Modest increase in defence spend

The increase in defence spending this year is much smaller than the 17.6% raise the armed forces received in last year's Budget-"one of the highest in recent years

Last Updated : Mar 01 2013 | 3:45 AM IST

A modest 5.3 per cent increase in the defence budget brought the overall outlay for defence in 2013-14 to Rs 2.03 lakh crore, up from Rs 1.93 lakh crore in the last Budget. The defence budget increased 14 per cent over the revised estimates of 2012-13, which stood at Rs 1.78 lakh crore.

Conceding that it was a small increase, finance minister P Chidambaram virtually apologised to the armed forces, thanking the defence minister "for being most understanding" about the cuts. But the armed forces were made to return the unspent Rs 14,900 crore from the 2012-13 Budget, possibly the largest sum ever and definitely the highest in percentage terms as a proportion of the total outlay.

By contrast, the allocation in the 2012-13 Budget, represented an increase of 17 per cent over the previous year.

The revised estimates (2012-13) reveal the extent of financial pressure on the armed forces. Of the amount unspent, Rs 10,000 crore was meant for capital expenditure and about Rs 4,904 crore has been returned from the revenue head. Capital expenditure represents money spent on modernisation; the huge return under this head means the armed forces' modernisation plans will take a hit, say experts.

The total capital outlay for the armed forces was put at Rs 79,578 crore in 2012-13. But in the revised estimates, this figure is Rs 69,578, suggesting about Rs 10,000 crore has been shaved off. The outlay for capital in the 2013-14 Budget is Rs 86,740 crore.

For revenue, the combined outlay for the three services in the Budget estimates for 2012-13 was Rs 1.13 lakh crore. In the 2012-13 revised estimates, it was Rs 1.08 lakh crore. The outlay for revenue for all the three services is Rs 1.16 lakh crore in the 2013-14 Budget.

The savings on revenue -" which is payments for salaries and also expenditure on fuel -" could have been on account of the lower than expected international oil prices as well as enforced fuel expenditure cuts. However, the biggest cut in the revenue expenditure of the Indian Army has been under 'Other Expenditure'.

An analysis of the revised estimates (RE) in 2012-13 and Budget estimate (BE) under the capital head suggests all three forces have put off their plans to modernise aircraft: the navy, for instance, was allocated Rs 5,300 crore for aircraft. It has spent only Rs 2,122 crore. It remains to be seen whether it will be able to spend the Rs 6,708 crore allocated this year.

Defence analyst Lakshman Behera of the Institute for Defence Studies and Analyses (IDSA), said, "One could justify the modest increase in the defence budget because the overall economy is not doing well. But if you break down outlays, the overall government expenditure has increased 12 per cent but defence expenditure has increased only 5.3 per cent."

Behera also said the growth in capital expenditure for the armed forces was 15 per cent last year; but only nine per cent this year. Nidhi Goyal, director, Deloitte Touche Tohmatsu India, is not so pessimistic. "The increase of 25 per cent in defence capital budget this year (over last year's revised estimate) is mainly towards aircraft and aero-engines with an increase of Rs 4,500 crore in navy, Rs 3,000 crore for airforce. For other equipment, it is Rs 5,600 crore in airforce, Rs 2,600 crore in army and Rs 1,200 crore for naval dock-"yards." she pointed out.

The procurement of the MMRCA (medium multi-role combat aircraft) for which a payment has to be made, was pushed back from 2012-13 to 2013-14 at the intervention of the finance ministry. Behera said there was no clarity whether the commercial negotiations with France's Rafale would be concluded in the new financial year.

The pattern of capital expenditure in defence over the years is interesting. In 2011-12, for instance, the actual expenditure was Rs 67,900 crore. In the revised estimates in 2012-13 the expenditure was up just Rs 2,000 crore to Rs 69,500 crore. Yet, the outlay has been increasing exponentially: In 2012-13 the outlay was Rs 79,500 crore and for 2013-14 it is projected to be Rs 86,700 crore. The trend shows that while grand outlays are announced, much less is actually spent.

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