The Defence Budget 2008-09: Facts and Figures - I

The defence budget outlays for 2008-09 (at Rs.1,05,600 crores) has witnessed an increase of ten percent at current prices and a 14.1 percent jump vis-à-vis last year’s revised estimates at Rs. 92,500 crores. Provisions for larger defence efforts, normally 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 percent of the total government expenditure, while the cumulative figure could be about 16 percent. And, it now accounts for 1.97 percent of the GDP, the latter being pegged at over Rs 53, 00,000 crores. This is for the first time that the defence budget accounts for less than 2 percent of the GDP while the Prime Minister of India had avowed that the nation does not mind spending up to 3 percent of GDP 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 it is needed.

One may argue that calculations taking constant prices and inflation adjustments into account 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 higher side of a single digit. Inflation adjustments could make the real term increase in defence expenditure to a bracket of about 4 – 5 percent. 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 revised Rs 54,795 crores spent last year, while capital outlays have increased to Rs. 48,007 crores from previous year’s revised estimates of Rs. 37,705 crores. This means that the revenue expenditure constitutes 54.53 percent of the total defence expenditure (TDE) while the capital expenditure constitutes 45.47 percent. 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 both soldiers and civilians) constitutes about 32 percent (with a high witnessed in Army, followed by the IAF and the Navy); while stores constitutes about 44 percent with others contributing the rest.

Capital expenditure (hereafter, CE), on the other hand, has witnessed a whooping 27 percent from previous year’s revised estimates. From Rs. 12,000 crores in 2001-02, the capital expenditure has witnessed an almost 400 percent increase in a span of seven years to touch Rs 48,000 crores in 2008-09. This is not unexpected in an era of ambitious military modernization undertaken by India in recent times. 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 about 11.8 percent increase in its outlays from last year’s Rs 5,800 crores to Rs 6,486 crores this year. Capital outlays for DRDO are Rs 3,092 crores, while the revenue expenditure is fixed at 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 percent of the revenue expenditure, while P&A accounts for 23 percent.

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 has 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).