Defence Expenditure in India- An Overview

Defence Expenditure in India-An Overview

A Broad PerspectiveThe Defence expenditure of a country is determined by many factors, both objective and subjective. These include:-The strategic environment and threat perception at a particular time. This may lead to the problem of short-term focus on defence and crisis management when things go wrong.The view of the government regarding its responsibilities towards the social, developmental and protective functions of the state and the relative priorities accorded to these functions.

A Broad PerspectiveThe perceived opportunity cost of defence spending. The more the social and developmental demands on the government, the higher the opportunity cost of defence becomes. But this is balanced by the opportunity cost of not spending on defence, which implies a determination and acceptance of the associated risk.The extent to which a government wishes to employ its defence forces to support diplomatic initiatives (for example, peace support operations) and as instruments for disaster relief and the provision of essential services.Defence spending spin-offs. Where positive spin-offs for the economic, technological and social development of the country can be obtained, defence spending will receive stronger national support. In this regard, the Make in India policy initiative is a cause that all stakeholders must wholeheartedly contribute to.

Defence Budget 2015-16

Defence budget for 2015-16 has grown by eight per cent over the preceding years budget allocation, the growth rate amounts to 11 per cent over the revised allocation for 2014-15. This means that the original budget allocation of 2014-15 has been revised downward, to the extent of Rs. 6,630 crore, or three per cent of the total. The downward revision was on account of the reduction in capital expenditure by Rs. 12,623 crore (13 per cent)Revenue Expenditure (Rs. in Crore)Capital Expenditure (Rs. in Crore)Total (Rs. in Crore)2014-15 (BE)134412.194588.0229000.02014-15 (RE)140404.881965.2222370.02015-16 (BE)152139.094588.0246727.0

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Share of Defence Services in Defence Budget 2015-16

Like in the past, the Army continues to be biggest stakeholder in the defence budget. With an approximate allocation of Rs. 1,30,874 crore, it accounts for 53 per cent of the total defence budget in 2015-16. It is to be noted, however, that the Army is the most revenue-intensive service. In 2015-16, 80 per cent of its budget has been earmarked for revenue expenditure. The corresponding figures for the Navy and Air force are 38 and 41 per cent, respectively

Comparative Statistics of Defence Budget: 2014-15 and 2015-162014-152015-16Defence Budget (Rs. in Crore)229000.0246727.0Growth of Defence Budget (%)12.47.74Revenue Expenditure (Rs. in Crore)134412.05152139.0Growth of Revenue Expenditure (%)14.913.2Share of Revenue Expenditure in Defence Budget (%)58.761.7Capital Expenditure (Rs. in Crore)94587.9594588.0Growth of Capital Expenditure (%)9.00.0Share of Capital Expenditure in Defence Budget (%)41.338.3Capital Acquisition (Rs. in Crore)75148.0377704*Growth of Capital Acquisition (%)2.33.4*Share of Defence Budget in GDP (%)1.811.75Share of Defence Budget in Central Government Expenditure (%)12.813.9

Trends in Defence Expenditure in India.

Defence expenditure (both Revenue & Capital) forms a part of the Non-Plan expenditure. While in 2000-01 it used be about 20.5 per cent (Revenue 15.33 & Capital 5.1) of the Non-plan expenditure, it has come down to about 18.5 per cent (Revenue 11.18 & Capital 7.45).The Defence expenditure as a percentage of total central Government expenditure (CGE) been declining steadily for more than three decades from about 22 to 25 per cent in the early 1970s to the historically lowest level of 12.47 per cent during the current year.

Trends in Defence Expenditure in IndiaThe ration of Defence expenditure to GDP stands at 1.75 per cent which is the lowest since 1962-63 when it stood at 2.32 per cent.The ratio has continued to decline over the last 30 years.Impact Of 14th Finance Commission on the Future of Allocation of Defence Services- Defence has to compete with other sectors to maintain its share in what has now become a smaller central pie.