India's defence budget needs to match strategic expectations

India's defence budget has been hardest hit, as the government scrambled to cut costs given the bleak economic growth of five percent -- the lowest in a decade. The cut came also against the backdrop of a history of under-utilisation of allocation by the defence ministry and the political hesitancy to conclude deals.

Unveiling the national budget for the next fiscal last Thursday, Finance Minister P. Chidambaram proposed a defence spending of Rs.2.03 trillion ($37.45 billion). This is a 5.2-percent increase from 2012-13, when the budget stood at Rs.1.93 trillion. Since the allocation and utilisation may change in the course of the fiscal year, the revised estimates accord a more realistic estimate of funds outflow.

Accordingly, the budget hike, in real terms, amounts to Rs.251.68 billion ($4.57 billion) over the revised estimates of Rs.1.78 trillion for the fiscal ending March 31, which amounts to a 14-percent increase. In 2012-13, the increase had been 17 percent.

Figures also reveal that the defence ministry suffered a budget cut of over Rs.140 billion last year, a majority of which -- over Rs.100 billion -- had been marked for procurement of new defence hardware.

India's annualised inflation rate of around 6 percent implies that the military has actually gained little from this year's increase. The U.S. defence expenditure amounted to $500 billion last year and China's was $110 billion. In comparison, India's defence budget of $38 billion is humble and barely 1.79 percent of the country's gross domestic product (GDP). This is a record low for India in at least three decades, with the figure dropping considerably from 3.16 percent of the GDP in 1987.