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Annual Budget with Focus on Defence Budget

March 04, 2015
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By Centre for Land Warfare Studies

Key Points

  1. Annual Defence Budget planning should support a defence policy based on threat assessment of the environment and resource allocation aligned with strategic considerations.
  2. The Defence Budget for 2015-16 for defence services is Rs 2,46,727 crore (US$40.4 billion), with revenue outlay of Rs. 1,52,139 crore and capital outlay of Rs. 94,588 crore & accounts for 1.75% of GDP and 13.88% of total central government expenditure (CGE).
  3. The current allocation is inadequate for military modernization and falls critically short in the overall endeavor of capacity building of armed forces.
  4. An overwhelming percentage of the capital budget is spent on meeting the committed liabilities and the balance amount is used for paying advances in respect of newly concluded contracts. Therefore, this would inevitably have implications for new schemes for which contracts are to be concluded.
  5. The revenue capital ratio is highly skewed in case of army (80:20) which has serious implications on capacity building. Revenue budget for army will not suffice to provide for procurement of ammunition, serviceability of equipment and maintenance of infrastructure. (page 4) Increased expenditure on Pay & Allowances adversely impacts the availability of revenue budget for sustenance & Stores budget head. These trends have not been given due cognizance in the budget. (page 5-6)
  6. The Ministry of Defence (MoD) has been taking steps to implement the concept of Outcome Budgeting (used for Naval Dockyards, DGNCC and DGMAP) but issues regarding costing and measurability remain. (page 8)
  7. As per Standing Committee’s recommendation, the defence allocation has to be raised to 2-3 per cent of the GDP gradually, keeping in view the threat perception from our adversaries and resource constraints on the financial side.
  8. Defence Budget, in the non plan segment, forms the second largest item of expenditure after interest payments and ahead of subsidies.(page 6)
  9. The implementation of OROP and 7th pay commission shall require additional funds, which have not been catered for in the budget. (page 5)
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