July 11, 2014
The interim budget presented in Parliament was a status quo budget. The 10 per cent hike in the interim defence budget with respect to both budget estimate and revised estimate of 2013-14 allocation was no upward or downward revision of the defence allocations provided in the previous budget & represented the erstwhile popular term of the 80s ‘the Hindu rate of growth’ to cater for inflation. While the overall 2013-14 allocations remained the same, the capital allocation was, however, revised downward by 9.07 per cent or Rs.7868.48 crore, which has been added to the revenue allocation.
What Has Been Ailing the Defence Budget in The Recent Past?
All watchers of the defence budget hoped that the much needed inescapable & overdue corrections will come when the new government that is formed after the elections presents the budget. The anxiety was because of the loss of direction seen in the defence budget allocations over the years was beginning to adversely affect the capability needed to take on the current & emerging challenges to national security. Although when absolute figures of defence are seen they create a perception of substantial increase over the years but when put in context the picture is different. A comparison of the Defence expenditure of 1997-98 and 2013-14 and that of the central government expenditure and the GDP is tabulated below.
Table no 1 (All Rupees in crores)
Increase over 1997-98
Central Government Expenditure
GDP at Market prices
Defence expenditure which was 2.24% of GDP in 1997-98 has come down to 1.79% of GDP in 2013-14 and this gradual decline is depicted in the chart No 1 below. The two spikes on increase in 2008-09 and 2009-10 are on account of pay commission arrears:
Chart No 1
The relationship with the Central government expenditure has similarly been of a steady fall as may be seen in chart No 2
Chart No 2
Three major heads of expenditure account for around 75% of the Non Plan Revenue expenditure. These are Interest, Defence expenditure & Subsidies. At the turn of the century these accounted for 70% of the Non plan expenditure with Interest accounting for 40%, Defence 20% and Subsidies 10%. Today they account for 75% of the Non plan Expenditure with Interest accounting for 34%, Subsidies 23% and Defence 18% (Details given in chart no 3 below.