Realities of Defence budget (2015-16)

[Agent_47]

Conclusion
The eight per cent growth in the defence budget for 2015-16 is disappointing on several accounts. First, the modest increase would most likely enlarge the already huge gap existing between the MoD’s resource requirement and the allocation made in successive budgets. Second, the stagnation of capital expenditure, which is crucial for building new capability, would further delay the on-going modernisation process. Having said that, the latest defence allocation has to be seen in the light of the new centre-state fiscal relations in which the fiscal space of the central government has shrunk due to the implementation of the report of the 14th Finance Commission. From both the short- and long-term perspectives, this is a major cause of concern for sectors like defence, which are completely dependent on the central government for their resource requirement.

What is more significant is that if the fiscal space does not widen rapidly in the future due to subdued growth in revenue collection (as has been the case in 2015-16), defence will have very little for augmenting its capital assets. As evident, the entire increase of Rs. 17,727 crore in the 2015-16 defence budget would be consumed by revenue expenditure, with manpower costs accounting for nearly half of it. Given the new fiscal reality, the government has to ponder seriously if such a situation – wherein extra funds allocated in the budget do not go towards capital expenditure – can be allowed to persist.

Third, the 2015-16 defence budget is also disappointing on account of the lack of a defence-specific ‘Make in India’ initiative. In particular, the budget does not speak of measures promised by the Prime Minister at the Aero India exhibition. Considering that defence manufacturing, particularly by the private sector, needs substantial investment on plant and machinery, technology and skill development, it is high time the government begins to incentivise industry and implement the measures promised by the Prime Minister himself.

Full report : http://www.idsa.in/issuebrief/IndiasDefenceBudget2015-16_lkbehera_020315

 

[fsayed]

Conclusion
The eight per cent growth in the defence budget for 2015-16 is disappointing on several accounts. First, the modest increase would most likely enlarge the already huge gap existing between the MoD’s resource requirement and the allocation made in successive budgets. Second, the stagnation of capital expenditure, which is crucial for building new capability, would further delay the on-going modernisation process. Having said that, the latest defence allocation has to be seen in the light of the new centre-state fiscal relations in which the fiscal space of the central government has shrunk due to the implementation of the report of the 14th Finance Commission. From both the short- and long-term perspectives, this is a major cause of concern for sectors like defence, which are completely dependent on the central government for their resource requirement.

What is more significant is that if the fiscal space does not widen rapidly in the future due to subdued growth in revenue collection (as has been the case in 2015-16), defence will have very little for augmenting its capital assets. As evident, the entire increase of Rs. 17,727 crore in the 2015-16 defence budget would be consumed by revenue expenditure, with manpower costs accounting for nearly half of it. Given the new fiscal reality, the government has to ponder seriously if such a situation – wherein extra funds allocated in the budget do not go towards capital expenditure – can be allowed to persist.

Third, the 2015-16 defence budget is also disappointing on account of the lack of a defence-specific ‘Make in India’ initiative. In particular, the budget does not speak of measures promised by the Prime Minister at the Aero India exhibition. Considering that defence manufacturing, particularly by the private sector, needs substantial investment on plant and machinery, technology and skill development, it is high time the government begins to incentivise industry and implement the measures promised by the Prime Minister himself.

Full report : http://www.idsa.in/issuebrief/IndiasDefenceBudget2015-16_lkbehera_020315

Arun jaitley is worst finance minister

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