The much touted 13.1 per cent increase in the defence budget this year could turn out to be only a mirage, casting an ominous shadow on the efforts of the armed forces at capabilitybased modernisation and complete transformation

Finance Minister Pranab Mukherjee announced a 17 per cent increase in India’s defence expenditure for the financial year 2012- 13 to support the modernisation of the Indian armed forces in the face of the growing Chinese dominance in Asia. The increase in allocation this year has been 1.93 lakh crore ($39 billion), up from Rs. 1.64 lakh crore ($36 billion) the previous year. Capital expenditure has been raised to Rs. 79,579 crore ($16 billion) from Rs. 69.199 crore a year ago.

The defence budget for 2012-13, presented in Parliament on March 16, was higher than that of the previous year by only 13.1 per cent and not by 17 per cent when computed against the revised allocations for the previous year. Although the announcement generated considerable excitement, in terms of international currency, the allocation this year was higher only by a paltry $3 billion.

Allocation for the acquisition of new weapons systems termed as “capital budget” is Rs. 79,578 crore for 2012-13, an increase of 15 per cent from Rs. 69,198 crore the previous year. However, correcting for three factors namely inflation, depreciation of the Indian rupee and escalation in the price of weapons systems procured from abroad; in real terms, the capital budget this year though seemingly higher, could perhaps be even somewhat lower than that of last year. This ought to be disconcerting especially for the Indian Air Force (IAF) as sizeable sums are required to be paid out during the forthcoming financial year for contracts already concluded or expected to be signed in the near future. Payments due as annual instalments are required to be made for the hardware already contracted for such as the 10 Boeing C-17 Globemaster III, two additional Falcon based airborne warning and control system aircraft, airborne early warning platforms from Embraer, 80 Mi-17V5 helicopters currently under induction, GE F414 aero engines for the Tejas Mk II and 490 MICA air defence missiles from MBDA, likely to be delivered in the near future. Besides, major deals that are expected to be concluded this year for the IAF include 126 medium multi-role combat aircraft (MMRCA) valued at around $20 billion ( Rs. 1,00,000 crore), 197 light utility helicopters (jointly with Army) from either Europe or Russia, 22 AH 64D Apache attack helicopters, 15 heavy lift helicopters (yet to be selected), 75 Pilatus PC-7 basic turboprop trainer aircraft from Switzerland, the six additional C-130J Super Hercules from Lockheed Martin and new engines for the Jaguar fleet. Then there are a number of other programmes involving foreign aerospace majors under way e.g. upgrade of Mirage 2000 and An-32 fleets. Apart from these, there would be heavy financial outlays for equipment already contracted for or for deals to be signed in the near future in respect of the Indian Army and the Indian Navy. Commitments over the next five to ten years for the acquisition of military hardware are estimated to be a colossal $100 billion ( Rs. 5,00,000 crore). Apart from capital expenditure, in the face of rising administrative costs and salaries, the revenue budget has been growing and will continue to mount in the coming years.