One of the mainstays of the BJP-led Narendra
Modi government has been the defence sector, with stress on improving the
nascent domestic defence industry, modernisation of the armed forces and
implementation of the One Rank One Pension (OROP) scheme.
10 percent hike in capital expenditure?
The Economic Times quoted brokerage firms as
saying that the Budget 2017 could see a hike of up to 10 percent in defence
capital expenditure, which will be used for defence modernisation, technology
and equipment procurement and more.
Jane's Defense Budget Report by IHS Markit has
says that India will "re-emerge as a key growth market for defence
suppliers over the next three years." It further noted, "However, the
challenge for the defence ministry is not Budget allocation, but execution."
However, Bloomberg noted that a hike in defence
allocation during the time of demonetisation is unlikely, due to the disruptive
cash ban.
With several global financial institutions
decreasing the Indian growth forecast, Laxman Behera, who has advised the
government on military expenditure and a fellow at Institute for Defence
Studies and Analyses in New Delhi said, "If growth is down, and there is
spillover effect, then it is definitely not a good sign for defence."
According to an annual IHS Jane's Defence Budgets
report, India ranks fourth in the list of top 10 defence spenders in the world.
Under-utilisation of defence allocation for procurement ::
One of the real issues for India is the
under-utilisation of the defence capital expenditure, with the defence ministry
surrendering about 10 percent of the allotment almost every year, according to
Defence ProAc, which the report calls, "real tragedy."
The defence ministry had surrendered about Rs
35,000 crore from its capital allocation for the previous four years, which has
been taken cognisance by the Standing Committee in its report. This has put
pressure on the government.
Issues like bureaucratic red tape, corruption,
cancelling of the tenders and lengthy development timelines from state-owned
contractors have also been stumbling blocks to full usage of India's defence
budget. Further, there is also the need to balance the immediate combat
requirements with that of the current government's "Make in India"
plan to boost domestic defence manufacture.
"Defence capex has seen a nine-15 per cent
under-utilisation during FY2013-16. We expect more favourable announcements for
the MSME sector to encourage participation and widen the defence eco-system in
the country," said brokerage India Nivesh in its report.
Filling critical gaps amid increasing geopolitical tensions ::
India needs to fill its critical gaps in
modernisation and procurement of weapons and equipment, be it submarines,
assault rifles, artillery guns or bulletproof jackets or others.
"From submarines to aircraft and from
ammunition to guns, there are critical gaps in practically every field,"
said Amit Cowshish, a retired financial adviser for acquisitions at the
ministry of defence, Bloomberg reported.
Further, the rise of China as an aggressive
military power is something India needs to answer. India sees itself as the
net-security provider to several countries in the Indian Ocean and detests any
influence from Chinese. Then there is Pakistan, which has been testing advanced
missiles and building up an advanced force.
Moreover this will be last budget, before the
government shifts its focus on getting re-elected.
"This is a make or break budget in my mind,
because this is a time when the government can give an additional advantage to
defence," said Manmohan Bahadur, a retired Air Vice Marshal in the Indian
Air Force.
"Government priorities change in the last
year, in any country," he added.
With recent videos of disgruntled soldiers
complaining about burnt rotis and bad conditions for soldiers posted in border
areas, the government might have no choice but to increase this year's budget.
Source :- International Business Times
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