Indian Defence Budget 2017-18

Although there is a modest increase of 5.6 per cent in India’s defence budget for 2017-18, this is seen as somewhat ‘lean’ in view of the growing list of requirements projected by the Armed Forces. The government has earmarked Rs 274,114.12 crore in the Union budget for the next fiscal and in addition, an allocation of Rs 857,140 crore for defence pensions was also announced by Finance Minister Arun Jaitley in his budget speech. Allocations for Defence for Financial Year 2017-18 are 12.77 per cent of the total central government expenditure, an estimated 2.1 per cent of the national GDP.

Observers feel that the marginal increase in capital expenditure could have an effect on the defence ministry’s plans to sign new contracts for defence equipment in the coming year. In November 2016, the defence minister had announced that 85 deals worth approximately Rs 150,000 crore were in various stages of finalisation and approval. Then there are committed liabilities in capital expenditure already made towards Rafale fighter aircraft (picture above), M-777 artillery guns and Apache and Chinook helicopters.

The Indian Army, with a manpower strength of some 1.3 million, is engaged in active counter-insurgency operations and defends a live border in various terrain throughout the year, but its procurement allocation of Rs 25,175 crore for the coming year is significantly lower than that of the Indian Air Force, which will get Rs 33,556 crore. The Indian Navy’s capital budget is at Rs 19,348 crore.

Importantly, at Rs 106,922.79 crore, pay and allowances of the defence services for FY 17-18 will now take away 39 per cent of the defence budget. With the implementation of ‘One Rank One Pension’ and the Seventh Pay Commission, the salaries and pensions of defence personnel are together estimated to be Rs 192,662.79 crore in the coming FY. Revenue Expenditure allocated to the DRDO is Rs 7,266 crore, not much higher than that in 2016-17.