Defence budget up 5%, capital spending flat; pension budget zooms

Finance Minister Nirmala Sitharaman. Photo: Dalip Kumar
The defence budget for the year 2020-21 has been raised by just 5 per cent over the current year’s revised allocations, following a multi-year trend of steadily reducing the share of defence spending as a percentage of the government’s total outlay.

Nirmala Sitharaman, herself a former defence minister, has allocated to defence Rs 471,378 crore, an increase of Rs 22,558 crore over the current year’s revised estimate of Rs 448,820 crore. This includes the outlay for revenue and capital expenditure, as well as military pensions.

This amounts to 15.5 per cent of the government’s total spending of Rs 3,042,230 crore next year. That share of government spending is significantly lower than this year’s share of 16.6 per cent, the 17.4 per cent share in 2018-19 and the 17.7 per cent in 2017-18.

Despite the large number of weapons systems due for procurement, the capital allocation has been raised only marginally from Rs 115,350 crore in the current year to Rs 118,534 crore in 2020-21. That rise of less than three per cent is insufficient to even cover inflation and forex exchange rate slippages. The military will, therefore, have less buying power next year. 

Worryingly, the only appreciable rise in spending is in defence pensions, for which the allocation has risen by almost 14 per cent to Rs 133,825 crore for 2020-21. This raise comes on the back of a an even larger 16 per cent raise this year, over the 2018-19 pension allocation.

Since the grant of “one rank, one pension” in 2015-16, the military pension budget has more than doubled from the level of Rs 60,000 crore in 2015-16.

The Indian Air Force (IAF) has again been allocated the lion’s share of the capital budget – Rs 43,282 crore, much of which will go towards instalments on earlier procurements, such as the 36 Rafale fighters that will begin delivery this year. However, this is lower than the IAF’s allocation of Rs 44,869 crore in the current year’s revised estimates.

There is disappointment for the navy, which has received a flat capital allocation of Rs 29,188 crore, despite public statements from senior admirals, including navy chief Admiral Karambir Singh, seeking a larger share of the defence budget. 

Without that, the navy says it will be in no position to process important procurements – such as the production of six advanced submarines under Project 75I and the building of a second indigenous aircraft carrier to follow INS Vikrant, which Cochin Shipyard Ltd is likely to deliver next year.

The army has got the largest hike in capital spending, but this 8 per cent rise of Rs 2,669 crore will be insufficient to pay for the artillery guns, tanks and air defence systems the army badly requires.


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