The MoD Order mentions that the IFAs are expected to give due attention to macro- management issues, highlighting the need for them to be involved in the planning and plan-review process. These are laudable objectives, but a well-knit mechanism for their implementation does not seem to exist at present.

It is a fairly simple exercise to estimate what the defence budget will be given available indicators. My assessment is that the Budget Estimate for defence is likely to be around Rs. 250,000 crore, with 105,000 crore for Capital Expenditure and 145,000 Crore for Revenue Expenditure.

The bad news in this year’s defence budget is that it does not recognise that things are not going in the right direction but only the beaten track. And the poor track record in fully utilising the resources allocated for ‘Modernisation’ is the worse news.

There has been much speculation since 2011 about who is going to manage the proposed fund, how is it to be different from the already existing technology related heads in the defence budget, and how will the amount set aside for the purpose be utilized.

If reports about the diversion of INR 13,000 crore from the capital segment of the defence budget to the revenue heads are true, it is an indication of the growing strain on the revenue budget.

There are speculations whether the present budget is sufficient to meet expenditure on big ticket items but one has to bear in mind that it is only the advance payment – generally 15% of the contract value – that becomes payable on signing of a new contract. Even if new contracts are signed for say INR 50,000 crore, MoD will require just about INR 7,500 crore for those schemes.