Defence Budget

India’s Defence Budget 2010-11: An Analysis

India's raised its defence budget for 2010-11 by 3.98 per cent to Rs. 1,47,377 crore. This allocation represents 2.12 per cent of gross domestic product (GDP), which is below the global average of 2.5 per cent. Considering the void in defence preparedness and the rising military expenditure and capability in neighbourhood, India needs to increase its defence spending to around 2.5-3.0 per cent of GDP. However, the increase in allocation has to go with reforms in capital acquisition system, which in present form is unable to spend the allocated resources.

Defence Budgeting: Trends and Issues

The defence budget for the financial year 2009-2010, even though in terms of percentage increase appears large, yet it is not actually so. There has generally been a mismatch between the funds asked by the MOD and those allotted by the MOF. The absence of indication of likely availability of funds impacts adversely the defence planning process. Of late, there has been improvement in the ratio of revenue to capital expenditure, but for a healthy ratio there is a need to increase the defence budget as a percentage of the GDP.

India’s Defence Public Sector Undertakings: A Performance Analysis

India has established eight Defence Public Sector Undertakings (DPSUs) whose responsibility is to provide the Armed Forces state-of-the-art equipments and at the same time enhance country's self-reliance in defence production. However the performance of these Undertakings is not up to the mark, resulting in import of arms worth billions of dollars every year. A deeper insight into DPSUs' production profile reveals that most of them are over-dependent on external sources for the production needs, and have a very low labour productivity level, negligible export, and a low R&D base.

Economic Downturn: Options for MoD

The present global economic crisis has slowed down the growth of the Indian economy, affecting among others, the fiscal situation and the revenue mobilisation potential of the central government. Defence being one of the largest recipients of central government expenditure, the present crisis casts a doubt on the adequacy of future resources. This commentary discusses some major options that India’s Ministry of Defence needs to consider in order to withstand the likely resource constraints in the coming years.