The government seems to have little fiscal space for accommodating the demand of the armed forces for additional funds, given its quantum on the one hand and the state of its revenues on the other which are already quite stressed.

Even if the Fifteenth Finance Commission manages to make a specific recommendation about the funds to be allocated for defence and internal security and the government accepts the recommendation, there can be no guarantee that the actual allocation will not fall short of the accepted level.

While the purpose of the Fall Clause, a price safety mechanism in rate contracts, is indubitable, some issues concerning its applicability and implications, both for the buyer and the seller, merit a review.

Ground reality rather than fiscal prudence should guide the Finance Minister while finalising the defence budget for 2011-12.