Lighter purse for arms deals

But India is likely to seal some of the biggest ‘Make-in-India’ deals in the sector

A close reading of the Budget numbers show that capital allocation for the purchase of new weapons and platforms for 2017-18 is lower than that in the present year.

In the coming financial year, India is also likely to conclude some of the biggest “Make-in-India” deals in defence sector.

“For defence expenditure excluding pensions, I have provided a sum of ₹2,74,114 crore including ₹86,488 crore for defence capital,” Mr. Jaitley said in his Budget speech on Wednesday.

On the face of it, compared with the ₹78,586.68 crore capital allocation for this year, it represents a 10% increase. However a closer look at the Budget documents presents a different picture.

Miscellaneous component

The defence Budget has various components of revenue, capital, miscellaneous and pensions. Of these the allocation for the miscellaneous component has gone down from ₹36,133.18 to ₹14,852.22. The balance has been readjusted to revenue and capital heads.

Stating this is a note at the end of the “Notes on demands for grants on capital outlay for ministry for defence (Misc)”: “The provisions relating to revenue and capital expenditure of Defence Ordnance Factories, Research and Development, Director General Quality Audit (DGQA), Rashtriya Rifles and National Cadet Corps have been shifted from this demand to demands for grants of defence services in BE 2017-18.”

Of this, the combined allocation under the five heads in the capital expenditure is ₹8,488 crore.

When deducted from the total capital allocation for the services, the revised figure is ₹78,000 crore which is in effect ₹586.68 crore less than last year’s.

In addition, there is annual inflation and currency fluctuation to be factored in. The capital budget includes payments for committed liabilities, which are payments for weapons already contracted, and remaining for procurement of new systems.

“Inflation does not affect the committee liabilities. It is the exchange rate fluctuation which affects that,” said Amit Cowshish, former Financial Adviser (Acquisition) in the Defence Ministry and Distinguished Fellow at Institute for Defence Studies & Analysis.

On the overall defence allocation, he said that it was a “flat budget”.