While the government has increased the defence budget by 5.91 per cent for FY 2018-19 to Rs 2,95,511.41 crore, the allocation is estimated at around 1.58 per cent of the country’s GDP — the lowest since 1962. An additional amount of Rs 1,08,853.30 crore has been provided for defence pensions.
The defence budget, which will account for 12.10 per cent of the total central government expenditure, is 7.81 per cent more than the Rs 2,74,114.12 crore announced in the last budget for FY 2017-18 — the figure was later revised to Rs 2,79,003.85 crore.
“A lot of emphasis has been given to modernising and enhancing the operational capability of the defence forces. A number of initiatives have been taken to develop and nurture intrinsic defence production capability to make the nation self-reliant for meeting our defence needs. Ensuring adequate budgetary support will be our priority,” Finance Minister Arun Jaitley said in his Budget speech.
Of the Rs 2,95,511.41 crore allocated, Rs 1,95,947.55 crore has been allocated for revenue (net) expenditure and Rs 99,563.86 crore for capital expenditure for the defence services and various organisations and departments under the defence ministry. The amount allocated for capital expenditure, including all modernisation related expenditure, is 33.1 per cent of the total central government expenditure on capital account.
But the allocation for defence pensions, at Rs 1,08,853.30 crore, has shot up by 26.60 per cent above the BE 2017-18 of Rs 85,740 crore and by 14.26 per cent over RE 2017-18 of Rs 95,000 crore.
This means that the country will spend more on defence pensions than it will on capital expenditure. Moreover, this is also the first time the pension amount has breached the Rs 1 lakh crore mark.
Welcoming the defence budget, Defence Minister Nirmala Sitharaman said it was a “very reasoned and realistic accommodation of our expectations”. Stating that the “allocation of funds for the defence ministry reflects what can be absorbed in a year”, Sitharaman said “defence modernisation is an ongoing process we will prioritise between competing demands”.
In his Budget speech, Jaitley also announced “measures to develop two defence industrial production corridors in the country”. “The government will also bring out an industry friendly Defence Production Policy 2018 to promote domestic production by public sector, private sector and MSMEs,” he said.
“These are the first ever defence production corridors being formed in the country. These defence industry corridors will give a big boost to defence production in the country,” said Sitharaman.