After slashing the capital expenditure (for acquisition of weaponry and other equipment for the armed forces) by `10,000 crore in 2012-13 in the revised Budget estimates compared to the original Budget allocation on account of cost-cutting, the Union government on Thursday hiked the defence budget only by about `10,000 crore to about `2.03 lakh crore for 2013-14 (a hike of about five per cent) compared to the original Budget allocation of about Rs. 1.93 lakh crore for 2012-13.
The defence budget hike was much lower than the 17 per cent hike announced last year for 2012-13 over 2011-12. This is perhaps due to the prevailing “difficult economic situation”.
However, the defence budget hike this year for 2013-14 will be 14 per cent if one were to compare it to the revised Budget estimates of about `1.78 lakh for 2012-13, since the defence budget was slashed by a total of about `15,000 crore in 2012-13.
Of the `2.03 lakh crore, about `1.16 lakh crore will be for revenue expenditure while the remaining `86,741 crore will be for capital expenditure (for new weaponry) in which a significant chunk has been earmarked for the Indian Air Force. This is not surprising since the MMRCA (combat aircraft) proposed mega-deal, which could be worth an estimated $20 billion, is expected to be signed in the coming financial year 2013-14.
The Budget allocation for 2013-14 will be `2,03,672 crore compared to the original allocation of `1,93,407 crore for 2012-13. The defence budget allocation for 2013-14 will be 1.79 per cent of GDP.
The `10,000 crore hike for 2013-14 over 2012-13 will be much less than the `29,000 crore hike announced last year for 2012-13 over 2011-12. Defence-watchers are worried that the percentage of the hike this year could be one of the lowest ever and that the defence budget is not even two per cent of the GDP.

On Thursday, both finance minister P. Chidambaram and defence minister A.K. Antony praised each other over the defence allocation issue. “I propose to increase the allocation for defence to `2,03,672 crore. This will include `86,741 crore for capital expenditure. The minister of defence has been most understanding, and I assure him and the House that constraints will not come in the way of providing any additional requirement for the security of the nation,” Mr Chidambaram said in his Budget speech.
In his reaction, Mr Antony said, “Taking into account the difficult economic situation both at home and abroad, the finance minister has done a good job. The measures that he has outlined for the rejuvenation of the economy while ensuring inclusive growth are indeed commendable. Factoring the current economic scenario, he has been fair to the defence sector also by increasing the budget and assuring that should there be any urgent need in future the same would be provided.”
Capital expenditure has been hiked to `86,741 crore for 2013-14. This is about `7,000 crore higher than the `79,578 crore (original capital expenditure allocation for 2012-13) and about `17,000 crore higher than the `69,578 crore (revised capital expenditure allocation) in 2012-13. Much to the disappointment of the armed forces, the capital expenditure for 2012-13 had been slashed from the original `79,578 crore to the revised `69,578 crore, a reduction of about `10,000 crore.
Of the capital expenditure of `86,741 crore for 2013-14, a significant chunk will go the IAF. For instance, `25,539 crore has been earmarked for IAF aircraft while `11,505 crore has been earmarked for IAF equipment. The proposed mega-deal for acquisition of 126 Rafale medium multi-role combat aircraft (MMRCA) from French manufacturer Dassault is expected to be signed in the coming financial year 2013-14. But about `11,772 crore for new acquisitions for the naval fleet, `6,708 crore worth of aircraft for the Navy, and `9,750 crore worth of equipment for the Army are also among the acquisition plans to be funded by capital expenditure.
But there has been disappointment among the armed forces due to the slashing of the capital expenditure in 2012-13 as indicated in the revised Budget estimates compared to the original allocation. For instance, over `2,600 crore was cut for naval fleet acquisitions and over `3,100 crore was cut for naval aircraft acquisitions in 2012-13, while more than `1,100 crore was cut for Army equipment acquisitions in 2012-13.
Apart from the proposed MMRCA acquisition for the IAF, India has several other major acquisition projects in the pipeline, including acquisition of artillery, air-defence guns and attack helicopters for the Army, and ships and helicopters for the Navy.