Defence budget up a minuscule 5%. Capital spending is flat, pension budget zooms - Broadsword by Ajai Shukla - Strategy. Economics. Defence.

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Saturday 1 February 2020

Defence budget up a minuscule 5%. Capital spending is flat, pension budget zooms

Nirmala Sitharaman, herself a former defence minister, has not done well by the military

By Ajai Shukla
Business Standard, 2nd February 2020

The defence budget for the year 2020-21 has been raised by just 5 per cent over the current year’s revised allocations, continuing a multi-year trend of steadily reducing the share of defence spending as a percentage of the government’s total outlay.

Nirmala Sitharaman, herself a former defence minister, has allocated Rs 471,378 crore to defence, an increase of Rs 22,558 crore over the current year’s Revised Estimate of Rs 448,820 crore. This includes the outlay for revenue and capital expediture, as well as military pensions.

This amounts to 15.5 per cent of the government’s total spending of Rs 3,042,230 crore (Rs 30.42 trillion) next year. That share of government spending is significantly lower than this year’s share of 16.6 per cent, the 17.4 per cent share in 2018-19 and the 17.7 per cent in 2017-18.

Despite the large number of weapons systems due for procurement, the capital allocation has been raised only marginally from Rs 115,350 crore in the current year to Rs 118,534 crore in 2020-21. That rise of less than 3 per cent is insufficient to even cover inflation and forex exchange rate slippages. The military will, therefore, have less buying power next year. 

Worryingly, the only appreciable rise in spending is in defence pensions, for which the allocation has risen by almost 14 per cent to Rs 133,825 crore for 2020-21. This raise comes on the back of a an even larger 16 per cent raise this year, over the 2018-19 pension allocation.

Since the grant of “one rank, one pension” in 2015-16, the military pension budget has more than doubled from the level of Rs 60,000 crore in 2015-16.

The Indian Air Force (IAF) has again been allocated the lion’s share of the capital budget – Rs 43,282 crore, much of which will go towards instalments on earlier procurements, such as the 36 Rafale fighters that will begin delivery this year. However, this is lower than the IAF’s allocation of Rs 44,869 crore in the current year’s Revised Estimates.

There is disappointment for the Navy, which has received a flat capital allocation of Rs 29,188 crore, despite public statements from senior admirals, including navy chief Admiral Karambir Singh, seeking a larger share of the defence budget. 

Without that, the Navy says it will be in no position to process important procurements – such as the production of six advanced submarines under Project 75I and the building of a second indigenous aircraft carrier to follow INS Vikrant, which Cochin Shipyard Ltd is likely to deliver next year.

The Army has got the largest hike in capital spending, but this eight per cent rise of Rs 2,669 crore will be insufficient to pay for the artillery guns, tanks and air defence systems the Army badly requires.


  1. Myopic baniya govt. A repeat of 1962 looming on the horizon. Not just because of the budget but also because of elevating muppets like BiRa.

  2. there is not enough money available to spend on defense and we are already spending a lot already. the key message for DMA and mod will be to buy locally and initiate dialogue. take the case of NE peace initiatives! same must be applied in JK and LWE areas. we can't be fighting every single day. army is withdrawing units from NE. trim the fat in all 3 wings and free up some budget.

  3. You might appreciate a nice visualization of the budget, to show where defence stands in comparison to other expenses:

    However, there are some differences in the figures mentioned for revenue and capital outlay, not sure why, though. Pension matches, though.

  4. Defence budget is high enough now. At $65 billion, it is now the 4th highest in the world.

    Spend less on burgeoning manpower and more on equipment.we don't need a 1.2 million strong Army. 600,000 is enough - We can unlock 1 lac crore a year to spend on modernisation of all three services.

    Neither do we need to retire everybody early and start paying pension.


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