Defence Industry

The Indian Defence Budget FY 2018-19
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Issue Net Edition | Date : 02 Feb , 2018

India’s Defence Budget FY 2018-19, today registered a marginal increase. Allocation from previous FY moved up from 2.74 lakh crores to 2.95 lakh crores. Thus, pitching the increase at 1.58% of the projected GDP for 2018-19. This is probably the lowest in terms of percentage, since the debacle of 1962.This increase is of 7.66% in terms of Budget Estimates (BE) when compared with that of FY 17-18.

India’s Finance Minister, Mr Arun Jaitley in his budget speech on Feb 01, 2018, dedicated 183 words to the armed forces of India. He praised the role played by our armed forces in meeting the challenges on our borders as well as in managing the internal security environment both in Jammu and Kashmir and the North East.

The Finance Minister in his speech said, “ever since the NDA Government has assumed office in 2014, lot of emphasis has been given to modernizing and enhancing the operational capability of the Defence Forces.  A number of initiatives have been taken to develop and nurture intrinsic defence production capability to make the Nation self-reliant for meeting our defence needs. Ensuring adequate budgetary support will be our priority”.

He emphasized that the government of the day hasopened up private investment in defence production including liberalizing foreign direct investment.  Mr Arun Jaitley announced his government’s intent to develop two “defence industrial production corridors” in the country. He added that the Government will also bring out an industry friendly Defence Production Policy 2018 to promote domestic production by public sector, private sector and MSMEs.

The Finance Minister declared that the government was focusing on developing connectivity infrastructure in border areas to secure the country’s defences. “Rohtang tunnel has been completed to provide all weather connectivity to the Ladakh region. Contract for construction of Zozila Pass tunnel of more than 14 kilometer is progressing well. He announced the proposal to take up construction of tunnel under Sela Pass (in Arunachal Pradesh).

Comparative analysis of the Defence Budget 2018-19 reveals that this increase of 7.6 % is majorly under Revenue head showing an increase of 8808 crore. Increase under Revenue head allotment has eclipsed the increase under Capital head by 1314 crore. A total of 62.52% revenue budget this year goes towards the ever-growing burden of pay and allowances of the armed forces personnel. 

Revenue Outlay FY 17-18 Revised 17-18 FY 18-19
Total 172773.89 cr 176515.84 cr 185323.19 cr
Pay & Allowance 106862.79 cr 109874.15 cr 115869.2 cr

Table 1

This defence budget under Demand No 21, reflects a capital outlay of just Rs 93982.13 crore. This fund is largely utilized for procurement of new weapon systems and modernization. Out of this allotted, nearly 80% would go towards realization of existing commitments (installment payments) of deals realized in the previous years. Implying that there would only be 18796.4 cr left for any new procurements towards modernization.

Capital Outlay FY 17-18 Revised 17-18 FY 18-19
Total 86488.01 cr 86488.01 cr 93982.13 cr
Army 25175.63 cr 25205.71 cr 26688.42 cr
Navy 19348.16 cr 19348.16 cr 20848.16 cr
Air Force 33555.62 cr 3555.62 cr 35755.62 cr
OF 803.62 cr 803.62 cr 803.68 cr
R&D 7552.32 cr 7552.32 cr 9734.45 cr
DGQA 7.97 cr 7.97 cr 9.96 cr
Tech Development 44.63 14.55 141.84 cr

Table 2

There is also a Capital allotment of 2700 crore for the Coast Guard under the Misc Head of Demand No 19 of the Defence Budget 2018-19. Thus, making an overall allocation of 96,682.13 crores for capacity and capability building.

However, it must be noted that the defence budget does not include Rs 1,08,853 crore separately allocated for defence pensions.

The annual defence budgets over the years have shown a discernible trend of declining modernization outlays for new projects. This has meant that our armed forces continue to grapple with critical shortages on several fronts ranging from tank ammunition to fighters and submarines to helicopters, howitzers and modern infantry weapons.

While the jugglery with the data and the percentages could depict the story of government’s apathy and neglect of our armed forces. The decline in the BE is steady and the trend pans over to almost three decades.

During the FY 2016-17 a sum of 6000 crores was left underutilized. Challenge actually has not been the budget allocation but rather, its underutilization. Even doubling this allocation would not solve the issue of underutilization of BE witnessed each year. Nation suffers in the bargain as capacity building and capability enhancement of our armed forces struggles to meet the growing security challenges. Therefore, the solution lies elsewhere outside the budget.

To overcome the challenge of underutilization of the Budget Estimates and ever-increasing Revenue Expenditure induced stress, we need to tackle it through structural reforms. It is now for the civil and military leadership of this country to introspect and review the existing structures, strengths, systems and procedures to overcome these existing formidable barriers hindering modernization.

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The views expressed are of the author and do not necessarily represent the opinions or policies of the Indian Defence Review.

About the Author

Danvir Singh

Associate Editor, Indian Defence Review, former Commanding Officer, 9 Sikh LI and author of  book "Kashmir's Death Trap: Tales of Perfidy and Valour".

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3 thoughts on “The Indian Defence Budget FY 2018-19

  1. 183 words to the armed forces of India !. But how many men and women have died in the past year in defense or law enforcement? This budget shows the lack of consideration that politicians and bureaucrats have with regard to defense. Paradoxically the 3 leaders of the Armies are very quiet and yet they were very talkative before and intervened at all! There are countries where chiefs of staff have resigned because they could not take into account the budgetary means granted the defense of their country. These men have existed in India in the past, but today they must be sought.

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