New Delhi - India on Saturday increased its defence budget by 10.95 percent (around four billion dollars) to Rs 2.46 lakh crore (40.07 billion dollars) for the next fiscal as compared to the revised estimates of Rs 2.22 lakh crore for 2014-15, suggesting that it will move only gradually with the military’s long wish list for fighter jets, ships and artillery.
The defence budget accounts for nearly 13.88 percent of the total government expenditure for the year 2015-16 which is Rs 1,777,477.04 crore. While the government had last year allotted Rs 2.29 lakh crore in the budget, it was revised to Rs 2,22,370 crore.
After years of neglect, India is trying to narrow the military gap with China, which has been building up its fleet of ships and submarines making forays in the Indian Ocean. China’s defence spending was $132 billion in 2014-15, a figure that many believe is under reported.
Indian Finance Minister Arun Jaitley underlined that defence of “every square inch of our mother land” comes before anything else. “So far, we have been dependent on imports, with its attendant unwelcome spin-offs,” he said, adding the government has already permitted FDI in defence. He said this was done so that the Indian-controlled entities also become manufacturers of defence equipments, not “only for us, but for export”.
Speaking on the steps taken to boost the defence sector, Jaitley said the government is working towards self- sufficiency through the Make-in-India programme in defence equipment including aircraft and added the government has been both transparent and quick in making defence equipment-related purchase decisions.
“This year too, I have provided adequately for the needs of the armed forces. As against likely expenditure of this year of Rs 2,22,370 crore the budget allocation for 2015-16 is Rs 2,46,727 crore,” he said in his budget address. He has earmarked Rs 94,588 crore for military modernisation, which works out to 38 percent of the total defence outlay.
Jaitley also pledged major investment in infrastructure, saying it was time for the economy to “fly”.
Arun Jaitley said his government had inherited an economy dominated by “doom and gloom” when it took power last year, trumpeting its achievements in conquering inflation and kick-starting growth.
“The credibility of the Indian economy has been reestablished. The world is predicting this is India’s chance to fly,” he said.
Jaitley said the government would increase spending on the country’s crumbling roads, railways and ports by $11.3 billion in 2015/16 as it seeks to win back investment and boost growth.
He pledged to complete 100,000 kilometres of roads currently under construction, build another 100,000 kilometres and commission five “ultra mega” power projects to help end electricity shortages.
The government will set up tax-free infrastructure bonds to finance its plans through a national fund that will receive a 200-billion-rupee ($3.2 billion) injection of public money. Jaitley also announced plans for a universal social security system that would give poor Indians access to subsidised insurance and pensions.
A new insurance scheme will provide coverage for accidents and death for just 12 rupees — less than 20 US cents — a year for India’s poorest.
The government also plans to set up a basic pension scheme for the millions of Indians currently unable to afford to put money aside for their old age, Jaitley said.
Despite new figures showing the economy is growing at a faster clip than previously thought, many ordinary Indians have yet to feel the benefit.
Modi’s Bharatiya Janata Party (BJP) last month suffered a drubbing in Delhi state elections, its first major defeat at the polls since it stormed to power, with critics saying Indians were tired of waiting for change.
Jaitley announced plans to cut the corporate tax rate from 30 to 25 percent over the next four years and replace a wealth tax with a two-percent levy on the super rich.
He said India had been “losing on both counts” because it was perceived by investors as a high tax economy, but realisation was very low due to the high number of exemptions.
Analysts broadly welcomed the moves, but said the budget was light on the big bang reforms that many had hoped to see.
“We all knew in our hearts that in a big democracy like ours (such) moves are most unlikely,” said Alok Churiwala, head of Churiwala Securities in Mumbai.
Jaitley said the government would achieve its goal of cutting the fiscal deficit to 4.1 percent of gross domestic product (GDP) for 2014/2015 from 4.5 percent the year before. But he said it would delay by a year the goal of cutting the deficit to 3 percent, forecasting a figure of 3.9 percent in 2015/16.