Budget 2016: Centre holds defence spending steady, seeks to lose 'top arms importer' tag

[anant_s]

NEW DELHI: The Centre plans to focus defence spending more on the domestic market instead of importing fighter planes, ships and submarines, after saying on Monday it will leave military spending for 2016-17 largely unchanged following years of increases. Union finance minister Arun Jaitley announced as part of his Budget 2016 speech a defence allocation of Rs 2.49 lakh crore.

HIGHLIGHTS

1. Arun Jaitley announced a defence allocation of Rs 2.49 lakh crore in Budget 2016.
2. This is a 0.96% increase over what was allocated last year.
3. In recent years, India has emerged as the one of the top arms importers in the world.

The allocation was a 0.96 per cent increase over the money the government had set aside for defence in 2015-16.

In recent years, India has emerged as the one of the top arms importers in the world. Major global defence companies have been circling over the Indian market, buoyed by the military's modernisation plans worth more than $100 billion. But the government of Prime Minister Narendra Modi has vowed to end the military's dependence on imports.

"For the first time this government is having a look at our procurement policies and they are telling the military we are not interested in your outright purchases anymore," said Deba R Mohanty, chairman of Indicia Research and Advisory, a consulting firm on defence affairs.

India's military is deployed on the border with China as well as Pakistan and says it has to plan for a "collusive threat" from them both. For decades it relied on the former Soviet Union to supply planes, ships and artillery.

Then it turned to Western manufacturers including France, United Kingdom and in recent years Israel and the United States for expensive combat planes, missiles and surveillance planes.

Amit Cowshish, who handled defence accounting in the ministry, said more than funds, the bigger problem was lack of clarity on the defence procurement policy.

"It's not that the money is not there, it's that there's no still no clear-cut policy on indigenous manufacture, the procedures etc. That is why even the money that has been allocated ends up not being spent."

The budget papers showed that the military didn't spend the full amount given to it last year. The revised estimate for spending for the fiscal year ending in March was Rs 2.24 lakh crore rupees.
Defence wages and pensions have also risen this year, making even less money available for modernisation, Cowshish said.
China is expected to announce a large rise in defence spending next month, as the ruling Communist Party seeks to assuage the military's unhappiness at sweeping reforms and as worries over the South China Sea and Taiwan weigh on Beijing.
At 886.9 billion yuan ($136.4 billion), China's budgeted defence spending last year was more than thrice that of India's expenditure announced on Monday.

http://timesofindia.indiatimes.com/budget-2016/industry/Budget-2016-Centre-holds-defence-spending-steady-seeks-to-lose-top-arms-importer-tag/articleshow/51198978.cms

 

[Shotgunner51]

View attachment 295937
NEW DELHI: The Centre plans to focus defence spending more on the domestic market instead of importing fighter planes, ships and submarines, after saying on Monday it will leave military spending for 2016-17 largely unchanged following years of increases. Union finance minister Arun Jaitley announced as part of his Budget 2016 speech a defence allocation of Rs 2.49 lakh crore.


The allocation was a 0.96 per cent increase over the money the government had set aside for defence in 2015-16.

In recent years, India has emerged as the one of the top arms importers in the world. Major global defence companies have been circling over the Indian market, buoyed by the military's modernisation plans worth more than $100 billion. But the government of Prime Minister Narendra Modi has vowed to end the military's dependence on imports.

"For the first time this government is having a look at our procurement policies and they are telling the military we are not interested in your outright purchases anymore," said Deba R Mohanty, chairman of Indicia Research and Advisory, a consulting firm on defence affairs.

India's military is deployed on the border with China as well as Pakistan and says it has to plan for a "collusive threat" from them both. For decades it relied on the former Soviet Union to supply planes, ships and artillery.

Then it turned to Western manufacturers including France, United Kingdom and in recent years Israel and the United States for expensive combat planes, missiles and surveillance planes.

Amit Cowshish, who handled defence accounting in the ministry, said more than funds, the bigger problem was lack of clarity on the defence procurement policy.

"It's not that the money is not there, it's that there's no still no clear-cut policy on indigenous manufacture, the procedures etc. That is why even the money that has been allocated ends up not being spent."

The budget papers showed that the military didn't spend the full amount given to it last year. The revised estimate for spending for the fiscal year ending in March was Rs 2.24 lakh crore rupees.
Defence wages and pensions have also risen this year, making even less money available for modernisation, Cowshish said.
China is expected to announce a large rise in defence spending next month, as the ruling Communist Party seeks to assuage the military's unhappiness at sweeping reforms and as worries over the South China Sea and Taiwan weigh on Beijing.
At 886.9 billion yuan ($136.4 billion), China's budgeted defence spending last year was more than thrice that of India's expenditure announced on Monday.

http://timesofindia.indiatimes.com/budget-2016/industry/Budget-2016-Centre-holds-defence-spending-steady-seeks-to-lose-top-arms-importer-tag/articleshow/51198978.cms

Rs 2.49 lakh crore is like in range of US$ 37 billion, is that right?

 

[anant_s]

Rs 2.49 lakh crore is like in range of US$ 37 billion, is that right?

yes my friend.
2.49 lakh Crore is 2.49 trillion Indian Rupees and at current exchange rate of 1USD ~ 67 INR, it would work out to USD 37.16 billion

 

[Abingdonboy]

View attachment 295937
NEW DELHI: The Centre plans to focus defence spending more on the domestic market instead of importing fighter planes, ships and submarines, after saying on Monday it will leave military spending for 2016-17 largely unchanged following years of increases. Union finance minister Arun Jaitley announced as part of his Budget 2016 speech a defence allocation of Rs 2.49 lakh crore.


The allocation was a 0.96 per cent increase over the money the government had set aside for defence in 2015-16.

In recent years, India has emerged as the one of the top arms importers in the world. Major global defence companies have been circling over the Indian market, buoyed by the military's modernisation plans worth more than $100 billion. But the government of Prime Minister Narendra Modi has vowed to end the military's dependence on imports.

"For the first time this government is having a look at our procurement policies and they are telling the military we are not interested in your outright purchases anymore," said Deba R Mohanty, chairman of Indicia Research and Advisory, a consulting firm on defence affairs.

India's military is deployed on the border with China as well as Pakistan and says it has to plan for a "collusive threat" from them both. For decades it relied on the former Soviet Union to supply planes, ships and artillery.

Then it turned to Western manufacturers including France, United Kingdom and in recent years Israel and the United States for expensive combat planes, missiles and surveillance planes.

Amit Cowshish, who handled defence accounting in the ministry, said more than funds, the bigger problem was lack of clarity on the defence procurement policy.

"It's not that the money is not there, it's that there's no still no clear-cut policy on indigenous manufacture, the procedures etc. That is why even the money that has been allocated ends up not being spent."

The budget papers showed that the military didn't spend the full amount given to it last year. The revised estimate for spending for the fiscal year ending in March was Rs 2.24 lakh crore rupees.
Defence wages and pensions have also risen this year, making even less money available for modernisation, Cowshish said.
China is expected to announce a large rise in defence spending next month, as the ruling Communist Party seeks to assuage the military's unhappiness at sweeping reforms and as worries over the South China Sea and Taiwan weigh on Beijing.
At 886.9 billion yuan ($136.4 billion), China's budgeted defence spending last year was more than thrice that of India's expenditure announced on Monday.

http://timesofindia.indiatimes.com/budget-2016/industry/Budget-2016-Centre-holds-defence-spending-steady-seeks-to-lose-top-arms-importer-tag/articleshow/51198978.cms

Hopefully this Govt puts its money where its mouth is and ensures that this amount is fully spent and MII is optimised for defence (as they keep emphasising is the case).

The actual amount allocated is irrelevent if the military is still returning billions in unspent funds every year to the Fin Min or playing accounting tricks to transfer CAPEX to the OPEX account.

 

[Water Car Engineer]

India should support upstart companies like Tonbo imaging, MKU, among several others. It's funny that Tonbo imagings supplied 5 countries(Including the US) before it supplied India. Thankfully, this is slowly changing.

 

[Shotgunner51]

yes my friend.
2.49 lakh Crore is 2.49 trillion Indian Rupees and at current exchange rate of 1USD ~ 67 INR, it would work out to USD 37.16 billion

Thanks for confirmation. It's like 1.7% of GDP am I right?

Same figure for China is roughly 1.3%, and after observing a few economies apparently below 2% is considered healthy, not damaging to a nation's economy. Your opinion?

 

[anant_s]

Thanks for confirmation. It's like 1.7% of GDP am I right?

Same figure for China is roughly 1.3%, and after observing a few economies apparently below 2% is considered healthy, no damaging to nation's economy. Your opinion?

Yes there is a red line at 2.5% but the fact is we desperately need funds for other sectors especially railways and Highway construction. This year Government had some respite due to lower crude oil imports but at the same time pay and pension hikes in several sectors has put government finances in a tight spot.
Inflation adjusted, this hike won't count much and given the desperate requirement for several modernization projects for armed forces, it remains to be seen how much actual capital expenditure we will actually be able to make.

China on the other hand, by sheer size of its economy, has a comparatively large budget (in absolute terms). but more than that i guess the true advantage lies in fact that your import bill for armed forces is very low (in percentage point terms). this is where current government in India is actually trying to bring in change.

 

[Abingdonboy]

Thanks for confirmation. It's like 1.7% of GDP am I right?

Same figure for China is roughly 1.3%, and after observing a few economies apparently below 2% is considered healthy, not damaging to a nation's economy. Your opinion?

About 1.7% of GDP correct- about the figure it has been at for a few years now.

Nations like India and China have far more important areas to be spending their precious resources on than weapons that will likely never be used (fingers crossed). Both have HUGE populations to take care of first wouldn't you agree my friend?

 

[anant_s]

Both have HUGE populations to take care of first wouldn't you agree my friend?

Thats correct.
Infact a clear view emerging this year is government's impetus on rural sector by trying to improve agriculture sector as this will ensure more spending power by rural population and ultimately improve services and consumer goods manufacturing sector.
Also notice the focus on healthcare (health insurance provisions).
overall it really looks a budget with very clear focus.

 

[Abingdonboy]

Thats correct.
Infact a clear view emerging this year is government's impetus on rural sector by trying to improve agriculture sector as this will ensure more spending power by rural population and ultimately improve services and consumer goods manufacturing sector.
Also notice the focus on healthcare (health insurance provisions).
overall it really looks a budget with very clear focus.

I also like how there was a focus on female education/training/empowerment- this is a major factor that is holding India back.

 

[Shotgunner51]

About 1.7% of GDP correct- about the figure it has been at for a few years now.

Nations like India and China have far more important areas to be spending their precious resources on than weapons that will likely never be used (fingers crossed). Both have HUGE populations to take care of first wouldn't you agree my friend?

Yes population size is one of many factors in determining defence budget, and several other factors no less important are like geopolitical vision, assessment of external threat, fiscal affordability, economic structure, industrialization level, influence of special interests groups, etc.

My observations are:

• One useful indicator to look at how wealthy economies are is to look at their external balance sheet, here you will find the most successful economies in the world are Japan, Germany, the two WWII defeated and turned pacifist nations, as well as Switzerland a neutral state, and Hong Kong which has practically zero defence spend. You will find the 1 to 1.2% level
• Despite being repeatedly urged by people like John McCain, these days NATO members (barring US of course) are generally spending far below 2% except UK.
  
• Since Deng Xiaoping' strategic shift of paradigm, China is so far doing fine, with defence spend maintained at 1.3% slightly higher than the above pacifist economies.
  
• We all know the collapse of USSR under its own weight, after fallen into a Reaganism trap.
• Contemporary Russia does maintain a high defence spend, the same is also observed in KSA. It's so far sustainable given the two economies have rich financial reserves, natural reserves.
  
• Reaganism brought up a massive and powerful domestic MIC, but didn't bring down US nation as a whole, nor did Bushism. Thanks to "American Exceptionalism" aka currency being world's hard currency, making it largely immune from usual hazards like trade deficits, current account deficits, fiscal deficit, public debts or external liabilities. This Exceptionalism secures purchasing power, promote consumption, hence tax monies can continue flowing to defence contractors. But this model is unique to US, who can continue to set new records in external liabilities without a sweat, others just simply can't. Check: News Release: U.S. Net International Investment Position

India is free of MIC's (barring foreign MIC lobby groups) so the state in principle can freely design a budget that fits her specific needs, the above samples are just for reference.