India's defence budget, a part of the country's annual financial statement (budget), has received a moderate increase of 0.96 percent (effective increase of 1.16 percent) for 2016-17.
Despite the positive vibes created by Make in India and a call for foreign and domestic private investors to capitalise on it, the defence allotment has been perceived to lack lustre. An overall outlay of Rs 2.49 lakh crore for 2016 is only a slight increase over last year's allocation.
According to a report by Economic Times, the NDA regime has also continuously fallen short of utilising its defence allotment over the last two years. The report said that the defence ministry has spent lesser by 13.5 percent (Rs 11,595 crore) of its allocated budget in 2015-16. And in the previous year of 2014-15, it could only spend 85 percent of its allocation.
A political-trend analysis suggests the NDA government's term has always cut a smaller piece for defence, be it utilisation or allocation. Unlike the previous UPA government, which exceeded the utilisation rate intermittently by 4 and 8 percent in 2008-09 and 2010-11, the NDA regime has always fallen short.
Defence analysts, however, believe the government is inspired by its policy of substituting imports with indigenous production and therefore not intent on spending big on foreign defence deals in the future. At the same time it has been promoting its Make in India initiative as a platform for both foreign and domestic players to venture.
"Yet more than funds, the bigger problem was lack of clarity on the defence procurement policy," according to Amit Cowshish, who handles defence accounting in the ministry."It's not that the money is not there, it's that there's still no clear-cut policy on indigenous manufacture, the procedures, etc. That is why even the money that has been allocated ends up not being spent," he told Reuters.
However, with its steady defence capex, the Budget 2016 emphasises on sustaining foreign deals while reinvigorating the spirits of home-grown enterprises. But until the government sets its policies in order as a top priority, defence modernisation is expected to take a further beating especially with mounting wages and pension cost.