The budget for the financial year 2015-16 presented on February 28, 2015, by the Union Minister of Finance, Arun Jaitley, not only to the Parliament but to the nation as well, has drawn reactions from different quarters that is being described as “mixed”. Some experts and analysts believe that this year’s budget, the second by the NDA Government since coming to power at the Centre, is a progressive one that will boost economic growth, make India an investment destination for the world, enter an era of ‘Make in India’ open up opportunities for the nation to better integrate with the global economy as well as boost rate of growth of the national economy to 8.5 per cent. However, there are others largely from the opposition, who believe that this budget is heavily weighted in favour of the corporate sector and in fact can be regarded more of an anti-people budget. This belief is strengthened by the fact that allocation for a number of social welfare schemes have been cut substantially, service tax enhanced and air travel made more expensive, a step that could impinge on the growth of the Indian airline industry that has been engaged in an endless battle for survival. Unlike in the past, this budget is indeed devoid of ‘goodies’ for the middle and lower middle class who are unlikely to be enthused by the ethereal national objectives that the Finance Minister has been aiming to achieve by the exercise.

As for the focus of the NDA Government on national security, the allocation for the Ministry of Defence for financial year 2015-16 stands at Rs. 2,46,727 crore as against an allocation of Rs. 2,29,000 crore made last year. The increase in the allocation for the Ministry of Defence this year is a mere 7.5 per cent as against a 12.4 per cent in the last year’s budget over the previous year. The increase this year when viewed against the revised estimates of last year that was Rs. 2,22,370 crore, would be around 10.9 per cent. However, as a percentage of GDP, the allocation for defence continues to hover around 1.75 per cent, a figure that has been generally regarded as grossly inadequate for the nation to cope with the challenges to national security as also to emerge as a regional military power.

During his presentation of the budget in the Parliament, the Finance Minister devoted just two to three minutes on the allocation for defence. In his brief coverage of this segment, he did go on to state that “Modernisation of the armed forces is critical to enable them to play their role effectively in the defence of India’s strategic interests.” While this may have sounded encouraging to those affected by allocation for defence in the national budget to begin with, a deeper analysis of the exercise by the Finance Minister reveals otherwise and is unlikely to elevate spirits in the Indian armed forces. The enhancement in the allocation for defence of Rs. 25,328 crore from the revised estimate of last year to a large extent, will be neutralised by the high annual inflation rate that could be in the region of six to seven per cent and the decline in the value of the Indian rupee against the US dollar as well as the routine escalation in the price of military hardware in the global market. A 7.5 per cent enhancement in the allocation for defence this year therefore is unlikely to be sufficient to finance the several procurement projects that been kept on hold for several years.

What is of particular interest to the Indian armed forces is the allocation for capital expenditure which is utilized for financing military hardware. This year, although the IAF has been allocated a sum of Rs. 31,481 crore that constitutes the largest share amongst the three services, in view of the high value procurements in the pipeline related to urgently required equipment, this sum may turn out to be totally inadequate. In case the Rs. 1,50,000 crore contract for 126 of the medium multi-role combat aircraft (MMRCA) is signed during this financial year, the government would have to shell out Rs. 15,000 crore as the first installment at the time of signing the contract. There are a number of other contracts in the pipeline for the IAF to urgently required platforms that include 38 Pilatus PC-7Mk II basic trainer aircraft from Switzerland, 22 Apache AH-64E attack helicopters and 15 Chinook CH-47F heavy-lift helicopters both from Boeing, a C-130J Super Hercules from Lockheed Martin to replace the one lost in an accident last year and six Airbus A330 MRTT flight refuelling aircraft, all totalling to Rs. 30,000 crore. The IAF is already in the process of inducting more of the Mi-17V5 medium-lift helicopters ordered earlier from Russia as well and will have to pay up front for the Su-30MKI, the advanced light helicopters and additional Hawk 132 advanced jet trainer aircraft being manufactured by the Hindustan Aeronautics Limited (HAL). The IAF will also have to pay for the development of the light utility helicopter, the intermediate jet trainer and unmanned aerial vehicles (UAV) to the Indian aerospace industry. With all these commitments on hand, the allocation under capital budget for the IAF would clearly be inadequate.

The Indian Army, the largest among the three services, has a capital budgetary allocation of only Rs. 21,574 crore while the service has major commitments on its hands. It has commenced the raising of a Mountain Strike Corps which will impose an annual financial burden of Rs. 9,200 crore for the next seven years. The Indian Army is also acquiring M777 artillery guns from the US, a contract that would entail a commitment for Rs. 5,000 crore. Similarly, the Indian Navy that has a major role towards maritime security so vital for economic growth of the nation, has been allocated a capital budget of Rs. 23,910 crore, higher than that allocated for the Indian Army.

Apart from the induction of aerial platforms, tanks and artillery, the Indian armed forces will require to procure support equipment by way of radars as well as improve their command and control systems, upgrade intelligence, surveillance and target acquisition capabilities through induction of modern equipment to operate effectively in a network-centric environment with high degree of cyber security.

When the NDA Government came to power in May 2014, the Indian armed forces were looking forward to a respite from the paralysis in decision making that the system had been afflicted with in the last decade. The initial impression is that the latest budget is a depressing indication that the situation for the Indian armed forces has not actually changed for the better. Hopefully, the NDA Government will not ignore the imperatives of national security and despite the seemingly inadequate budgetary support to the Indian armed forces in the current financial year, the government will muster the resources to ensure that the modernisation effort of the Indian armed forces is not undermined.