Defence allocation sees moderate rise to $70 billion, air force gets largest capital boost

 

By Ajai Shukla

Business Standard, 2nd Feb 22

 

Notwithstanding a still sluggish economy, and sustained military pressure on the army from multiple intrusions by Chinese troops on the border in Ladakh, the government has raised defence allocations for financial year (FY) 2022-23 by less than five per cent, compared to the revised estimates for FY 2021-22 and by almost 10 per cent over BE 2021-22.

 

The government had allocated US$ 64 billion (Rs 478,196 crore or Rs 4.78 trillion) for BE 2021-22. In the revised estimates for 2021-22, that was raised to US$ 67 billion (Rs 502,883 crore or Rs 5.02 trillion). In the budget for FY 2022-23, the government has allocated US$ 70 billion (Rs 525,167 crore or Rs 5.25 trillion).

 

While the 1.3-million-strong army has been given the bulk of the revenue and pension budgets, the Indian Air Force (IAF) has been allocated the biggest share of the capital allocation: US$ 7.4 billion (Rs 55,587 crore), or about 10 per cent more than what the IAF got last year.

Defence allocations from 2017-18

(In billion US dollars)

	2017-18 (Actual)	2018-19 (Actual)	2019-20 (Actual)	2020-21 (Actual)	2021-22 (RE)	2021-22 (BE)
Revenue allocation	25.7	27	29.6	29.1	30	32.8
Capital allocation	12.76	13.32	15.20	18.67	19.47	21.41
Pension allocation	12.3	13.6	15.75	17.13	15.63	16
Total Defence Budget	50.78	53.96	60.59	64.96	67.26	70.24
Total central govt spending	286.5	309.66	359.31	469.46	504.27	527.66
Defence as percentage of govt spending	17.7%	17.4%	16.9%	13.8%	13.35%	13.3%
Gross Domestic Product	1.678 tn	2.504 tn	2.720 tn	2.605 tn	3.105 tn	3.450 tn
Defence as % of GDP	2.23%	2.16%	2.2%	2.4%	2.16%	2.03%

 

 

The IAF faces a continuing burden of payments for 36 Rafale fighters it bought in 2016, modernization of the Mirage 2000 and Jaguar fighter fleets, and the manufacture of Sukhoi-30MKIs and Tejas fighters by Hindustan Aeronautics Ltd (HAL). There is also a large expenditure looming on a tender for 114 multi-role fighters, for which the IAF has initiated a global procurement.

 

To the army’s credit, it has deployed a large number of troops and equipment to the Ladakh frontier without seriously overshooting its revenue budget, from which payments for such a deployment is made. 

 

Meanwhile, the navy has been given a capital budget of US$ 6.4 billion (Rs 47,591 crore or Rs 4.76 trillion), about the same as the preceding year’s allocation. The army has once again been allocated the smallest share: US$ 4.3 billion (Rs 32,015 crore or Rs 32 trillion).

 

Indicating the intent to keep money flowing to indigenous research & development (R&D) projects, the Defence Research & Development Organisation (DRDO) was allocated a healthy capital budget of US$ 1.6 billion (Rs 11,982 crore).

 

After years of lip service to funding prototype development under the Technology Development programme, the government this year allocated a relatively healthy US$ 183 million (Rs 1,365 crore) for prototype development under the “Make” category of acquisitions.

 

In what would have come as a relief, the Ministry of Defence (MoD) has managed to stabilize pensions. The pension allocations were kept at US$ 16 billion (Rs 119,696 crore), up by US$ 377 million (Rs 2,818 crore).

 

With an emphasis on infrastucture building by the military, the capital segment of the MoD (Civil) budget, which caters to organisations such as the Indian Coast Guard (ICG), Border Roads Organisation (BRO) and Directorate General Defence Estates (DGDE), has seen a notable jump of 55.6 per cent. In absolute terms, the capital allocations under these heads is US$ 1.08 billion (Rs 8,050 crore) in FY 2022-23 – up more than 50 per cent against the allocations of US$ 690 million (Rs 5,173 crore) in FY 2021-22.

 

With the aim of strengthening border infrastructure, the BRO’s capital budget has been increased by 40 per cent from US$ 334 million (Rs 2,500 crore) in the current year to US$ 468 million (Rs 3,500 crore) in FY 2022-23.

 

“This will expedite the progress of creation of border infrastructure including important tunnels (Sela and Naechiphu tunnel) and bridges on major river gaps,” stated the MoD in a statement on Tuesday.