The Defence Budget 2008-09: Facts and Figures - I
The defence budget outlays for 2008-09 (at Rs.1,05,600 crores) have increased by ten per cent at current prices and by 14.1 per cent vis-à-vis last year’s revised estimates of Rs. 92,500 crores. Provisions for more considerable defence efforts typically not included in the defence budget (for example, outlays for civil defence, coast guard, etc.) could put the figure at Rs. 1 25,000 crore or possibly more.
The defence budget accounts for 14 per cent of the total government expenditure, while the cumulative figure could be about 16 per cent. And it now accounts for 1.97 per cent of the GDP, pegged at over Rs 53 00,000 crores. This is for the first time that the defence budget accounts for less than 2 per cent of the GDP, while the Prime Minister of India avowed that the nation does not mind spending up to 3 per cent on national defence! It has also become a ritual for every finance minister to make an addendum – additional resources will be provided as and when needed.
One may argue that calculations considering constant prices and inflation adjustments could put the real-term increase in defence expenditure at a much lower level. For example, at constant 1999-2000 prices, the same would come down to the higher side of a single digit. Inflation adjustments could increase the real-term defence expenditure to a bracket of about 4 – 5 per cent. This means that the defence expenditure has received a negligibly modest hike.
The Defence BE is divided into two major parts – Revenue and Capital. Revenue outlays have been raised to Rs. 57,593 crore as against the revised Rs 54,795 crore spent last year, while capital outlays have increased to Rs. 48,007 crore from the previous year’s revised estimates of Rs. 37,705 crore. This means that the revenue expenditure constitutes 54.53 per cent of the total defence expenditure (TDE), while the capital expenditure constitutes 45.47 per cent. Major revenue outlays across the services within defence BE constitute pay & allowances (P&A), transport, stores, works, repairs, joint staff, special projects, and other expenditures. Trends for the past several years suggest that P&A (including soldiers and civilians) constitutes about 32 per cent (with a high witnessed in the Army, followed by the IAF and the Navy), while stores constitute about 44 per cent, with others contributing the rest.
On the other hand, capital expenditure (hereafter, CE) has witnessed a whopping 27 per cent from the previous year’s revised estimates. From Rs. 12,000 crores in 2001-02, the capital expenditure has seen an almost 400 per cent increase in seven years to reach Rs 48,000 crores in 2008-09. This is not unexpected in an era of recent ambitious military modernization undertaken by India. Major sectoral allocations within capital outlays include land & construction, aircraft & aero-engine, heavy & medium vehicles, other equipment, naval fleet & dockyard, joint staff & special projects.
Department of Defence Research and Development has witnessed an 11.8 per cent increase in its outlays from last year’s Rs 5,800 crores to Rs 6,486 crores. Capital outlays for DRDO are Rs 3,092 crores, while the revenue expenditure is Rs. 3,393.5 crores. Again, as in the case of defence services, there are allocations within DRDO’s revenue budget like R&D (Rs 660.6 crores) and stores (Rs 1,466 crores), which constitute about 63 per cent of the revenue expenditure, while P&A accounts for 23 per cent.
Revenue outlays for joint staff (Rs. 489 crores) have come down from last year’s revised estimates of Rs. 519 crores. Interestingly, this has been categorised under the ‘Defence Services – Navy’ head, while capital outlays for joint staff have been raised from Rs 288 to 358 crores. Other non-plan capital outlays related to national defence include acquisition of capital goods (ships, vessels, aircraft, etc.) for the Coast Guard (Rs. 948 crores), capital outlays for construction of defence accounts department (Rs 38.5 crores), outlays for Assam Rifles (Rs. 125 crores), high-tech surveillance and creation of infrastructure for borders and coastal security (Rs 327 crores).
Read the Second part of this series on India's Defence Budget.