Presenting the Union Budget for 2021-22, Union Finance Minister Nirmala Sitharaman allocated Rs 4.78 lakh crore including outlay for payment of pensions against last year’s Rs 4.71 lakh crore. The amount includes capital expenditure worth Rs 1.35 lakh crore to purchase new weapons, aircraft, warships and other military hardware against the capital outlay of Rs 1.13 lakh crore during 2020- 21. At a time when India is locked in a prolonged standoff with China in eastern Ladakh, straining its resources, Union Finance Minister Nirmala Sitharaman allocated Rs 3.62 lakh crore, excluding pensions, for defence expenditure ~ up by 7.4 per cent from last year. The total outlay for the Defence Ministry in Budget 2021 is pegged at Rs 4,78,195.62 crore, with pension liabilities down by Rs 18,000 crore from the present fiscal. The outlay for weapons and modernisation has been increased from Rs 1,13,734 lakh crore last year to Rs 1,35,060 crore for 2021-22 ~ a rise of 18 per cent. The increased budget for modernisation will help the armed forces equip themselves with new weapon systems and spares. In this year’s budget, the capital outlay for the Indian Army is Rs 36,481 crore, for the Air Force it is Rs 53, 214 crore and for the Navy, it is Rs 33,253 crore.

Defence Minister Rajnath Singh thanked Prime Minister Narendra Modi and Mrs. Sitharaman for increasing the defence budget. “I specially thank PM & FM for increasing the defence budget to 4.78 lakh crore for FY21-22 which includes capital expenditure worth Rs 1.35 lakh crore. It is nearly 19 percent increase in Defence capital expenditure. This is highest ever increase in capital outlay for defence in 15yrs,” Singh tweeted.

The total revenue expenditure, which includes expenses on payment of salaries and maintenance of establishments, has been pegged at Rs 3.37 lakh crore. The total revenue expenditure included Rs 1.15 lakh crore for payment of pensions.

Budget documents revealed that the Defence Ministry spent an additional Rs 20,776 crore for buying new weapon systems and spares for the armed forces in the present fiscal over and above the funds allocated for the purpose.

The amount has been used to acquire equipment like the Spice-2000 bombs, Spike antitank guided missiles, SiG Sauer assault rifles, Excalibur ammunition, multiple types of aircraft spares from Russia along with ammunition for tanks and fighter jets. There was an expectation for a significant increase in the allocation to the forces, given the added strain of deployments in the Ladakh, where about 50,000 troops have been stationed through the harsh winter. While it was the Indian Army holding fort at the Ladakh borders during the tensions that started last year in May, the jump in revised expenditures for 2020-21 of the Navy and Air Force was much more. Last year, the Indian Air Force’s original allocation was exceeded by Rs 11,773 crore and the Navy spent Rs 10,854 crore over their budget. In comparison, the Army spent Rs 821 crore above its allocation.

The defence ministry also carried out extensive construction work on borders last year, following the India-China standoff. While the estimated budget for the civil work was Rs 14,500 crore, it increased to Rs 15,914.06 crore as the government spent on building infrastructure in border areas.

Apart from that, the allocation for civil works under the Ministry of Defence is Rs 15,257 crore as against revised allocation Rs 15,914.06 crore in last year’s budget. The civil allocation includes funds for construction of roads and bridges, as well as government aid to state governments and housing in North East regions and border areas.

The Finance Commission’s proposal of a non-lapsable fund for the defence sector has been accepted in principle but the modalities are to be worked out. Mrs. Sitharaman said, “In principle, we have accepted that but what formulation that will take will be different. That is something the ministry will have to work out.” India had reported earlier that the Ministry of Defence had proposed a roll-on non-lapsable budget over a period of five years for bigticket acquisitions. It is proposed that a fund of Rs 2.38 lakh crore will be available for a period of five years ~ 2021-26 ~ that will not lapse. The fund can be used for modernisation of forces, capital investment for central armed police forces and also state police forces.

Amidst the ongoing standoff between India and China along the Line of Actual Control (LAC) since last May, the hike in the defence budget announced is negligible. In view of the many challenges being faced by India, the Budget 2021-2022 was indeed a challenging one for the Finance Minister.

Given the expectations that a large infusion of funds would come into the sector to prepare armed forces for the new twofront challenge and the ‘Atmanirbhar Bharat’ initiative in the field of defence manufacture with coming up of two Defence Industrial Corridors (DIC) and the aim of achieving $5 bn defence equipment exports by 2025; the outlay seems to be insufficient. Military experts expressed satisfaction at the overall allocation considering the coronavirus-triggered adverse impact on the economy, though they said India would have to gradually raise its defence spending to deal with increasing external threats.

“I am satisfied with the total allocation to the armed forces considering the state of the economy in view of the impact of the coronavirus pandemic,” said Dr. Laxman Behera, a noted defence expert. He said the increase of around Rs 22,000 crore in capital outlay is a welcome move, which will help the three services in carrying out their modernisation drive.

“Nearly 20 per cent increase in Capital Defence Budget is positive. Hope we will not see an overspend on the Revenue and Pensions,” tweeted former Chief of Army Staff Gen (retd) V P Malik. He said another positive aspect was the assurance that the “capital defence budget” will be non-lapsable as advised by the Finance Commission.

The capital allocation for the Defence Research and Development Organisation (DRDO) has been pegged at Rs 11,375 crore which is an increase of 8 per cent over the amount earmarked in 2020-21.

The allocation for Border Roads Organisation (BRO) has been increased to Rs 6,004 crore which is 7.48 per cent more than the amount given in 2021-22.

Keeping in view the threat perception from both China and Pakistan India has to increase its defence outlay from 2.5 to 3 per cent of the GDP.