Indian Army
Indian ArmyReuters

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 seems to lack lustre. An overall outlay of Rs 2.49 lakh crore for 2016 is only a slight increase over last year's allocation.

Added to it is the shortfall in the NDA regime's utilisation rate of the allotted defence budget year-over-year. "The defence ministry has spent lesser by 13.5 percent (Rs 11,595 crore) of its allocated budget in 2015-16. And 2014-15 could only achieve an 85 percent spend-rate," says an Economic Times report.

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 by 8 percent and 4 percent a few times in its term, the NDA regime has continuously fallen short.

Defence analysts, however, believe it also indicates the current government's policy of import substitution. It is in this context that the $100-billion defence modernisation dream of the previous government seems to have been subjected to a reality check this time again.

Amit Cowshish, who handles defence accounting in the ministry, told the Times of India, more than funds, the bigger problem was lack of clarity on the defence procurement policy. "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."

With a steady capex, the Budget 2016 emphasises on sustaining foreign deals while reinvigorating the spirits of home-grown enterprises. However, with increasing defence wages and pension, modernisation could take a further beating unless the government sets its policies in order as a first priority.