Defence Budget 2021: Increased capital expenditure much-needed step in context of rising Chinese threat

While the defence Budget presented on Monday reflected only a minor hike in allocation, a reflection of the heightened tensions along the Line of Actual Control could be seen in unbudgeted spending and an increased push towards capital expenditure. To be precise, the overall defence Budget for 2021-22 was hiked by around 1.4 percent. However, there was a nearly 19 percent rise in capital outlay for military modernisation. Also, official data showed that an additional unbudgeted Rs 20,776 crore was spent to buy military hardware amid the Ladakh border standoff with China. According to the 2021-22 Budget documents presented by finance minister Nirmala Sitharaman in Parliament, the allocation for defence services was increased to Rs 4.78 lakh crore compared to Rs 4.71 lakh crore in the 2020-21 Budget. In a tweet, Defence Minister Rajnath Singh thanked Prime Minister Narendra Modi and Sitharaman for increasing the defence Budget to Rs 4,78,195 crore, and said the nearly 19 percent hike in the capital expenditure is the “highest ever” increase in the last 15 years.

I specially thank PM& FM for increasing the defence budget to 4.78 lakh cr for FY21-22 which includes capital expenditure worth Rs 1.35 lakh crore. It is nearly19 percent increase in Defence capital expenditure. This is highest ever increase in capital outlay for defence in 15yrs

— Rajnath Singh (@rajnathsingh) February 1, 2021

Revised estimates reflect emergency procurements The Budget document shows that there is an increase of Rs 20,776 crore from the budget estimates to the revised estimates in the defence sector. According to an article in The Times of India, a series of emergency procurements India made from countries like the US, France, Russia and Israel account for the increase. The procurements made are said to include missiles, precision-guided minitions, drones, assault rifles and specialised winter clothing and equipment. India is estimated to be among the top five countries in terms of military expenditure. However, as the article quoted above notes, maintenance of the armed forces, salaries and pensions account for most of the expenditure, leaving relatively less for military modernisation measures. In this context, the increase in capital expenditure could mark a change for the better. An article in India Today quotes Laxman Kumar Behera, associate professor, Special Centre for National Security Studies at the Jawaharlal Nehru University (JNU), as saying, “This is the first time that the Ministry of Defence’s budget is driven by capital expenditure which was not the case earlier.” In a similar vein, former Chief of Army Staff Gen (retd) V P Malik tweeted, “Nearly 20 percent increase in Capital Defence Budget is positive. Hope we will not see an overspend on the Revenue and Pensions.” He said another positive aspect was the assurance that the “capital defence budget” will be non-lapsable as advised by the Finance Commission. However, even as the massive unbudgeted expenditure reflects the urgency of the Chinese threat along the LAC, India’s expenditure on defence remains far behind that of China. According to data from the Center for Strategic and International Studies, India’s defence Budget is about a quarter of the amount allocated by China. In May 2020, Beijing announced a yearly defence budget $178.6 billion. The increased allocation for capital expenditure can be seen as a step towards bridging this gap. Out of total allocation in the defence Budget, Rs 1.35 lakh crore has been set aside for capital outlay to purchase new weapons, aircraft, warships and other military hardware. The Army has been granted a capital outlay of Rs 36,481 crore as against Rs 33,213 crore in 2020-21, as per the revised estimates. The allocation made to the Navy for capital expenditure is Rs 33,253 crore which was Rs 37,542 crore in the previous budget. Similarly, the Indian Air Force(IAF) has been given Rs 53,214 crore to buy new platforms and weapons which is a drop of Rs 1,840 crore compared to the money it spent under capital expenditure in the current fiscal. The budgetary capital outlay for the IAF for 2020-21 was Rs 43,281.91 crore but the revised estimate put the figure at Rs 55,055 crore. With inputs from PTI