India's defense budget down to 1.65% of GDP

March 1
4:29 AM 2016

For the first time since its war with China in 1962, India's budget allocation for its defense sector fell in the latest Union Budget-2016. The budget allocation for the defense sector was down to 1.65 percent of the gross domestic product (GDP) from 1.74 percent in the previous budget. 

The latest budget allocations to its defense sector fell to the lowest since 1962, when a war between India and China took place. India's Finance Minister Arun Jaitely has allocated INR2,49,099 crore (1crore=10 millions) for the defense sector in 2016-17 budget. It's marginally up from previous financial year's budget allocation of INR2,46,727 crore.

Business Standard reports the marginal increase in budget allocation to defense sector is not even matching the defense inflation, which is normally at 15 percent annually. The meager increase of INR 2,372 crore is much below the average growth of 15-20 percent in every budget allocation. The capital spending has been flat for the past three years. 

Though pensions are not included in the budget allocations, the latest pressure from One Rank One Pension (OROP) implementation is creating further financial burden. This factor also caused to cut in modernization outlay in the defense sector. Now, Indian armed forces have less money to buy new equipment. 

Finance Ministry made 8.5 percent reduction in capital outlay. For the first time, the Finance Minister didn't even mention the 'defense allocation' phrase,not even once, in his budget speech. The drop in budget allocations for the defense sector will also impact private sector, which is totally dependent upon government orders, according to The Economic Times.

Apart from this, the non-mention of defense allocation word in the budget speech is raising many eyebrows. Generally, every finance minister pays tribute to the military. Finance ministers do mention defense allocations in their budget speech by showing a lot of pride in their voice in giving respect to the military forces. Brigadier Gurmeet Kanwal (retd), a strategic affairs expert, said "I have been tracking the budget for more than 17 years and this is the first time there's no word on defense allocation."

The funds allocated for the modernization of military is less than the previous year's budget. The defense allocation as proportion of total budget fell to 7.7 percent for 2016-17 financial year from the 10.95 percent in 2015-16 financial year. The defense allocation as proportion in GDP was 1.65 percent for the current financial year from 1.74 percent in the previous year. Considering the alarmingly growing military strength of China, defense experts opine that the country's budget allocation for military should be three percent of GDP, as reported by Hindustan Times.

Arun Jaitley has increased the revenue expenditure by INR 19, 523 crore or 14 percent from INR 1,43,236 crore to INR 1,62,759 crore. After Seventh Pay Commission coming into force, the military expenditure rose further in form of higher salaries. In addition to this, manpower is also increasing in the defense sector.

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