Defence Budget 2021: Guns over butter | India Today Insight

02 Feb 2021

Among the most closely anticipated items in Budget 2020-21 was the defence budget. Current military tensions on the border with China in Ladakh have increased costs of the army and air force with the increase in deployment of troops and military aircraft all along the northern borders. The border tensions have also spurred the need to buy new military hardware to urgently plug gaps.

The first indications that there would be no hike in the defence budget came when finance minister Nirmala Sitharaman did not mention the defence outlay at all in her speech. And this was indeed the case. The Rs 4.78 lakh crore defence budget (including defence pensions) saw a modest hike of a little over Rs 6,000 crore or 1.4 per centamong the most meagre increments in recent years. The defence budget is usually hiked by around 10 per cent or roughly Rs 40,000 crore each year. A comparision of the Budget Estimates and the Revised Estimates for 2020-21 showed an increase of Rs 20,766 crore last year this additional spend was to buy new military hardware following the Ladakh standoff.

Meanwhile, while the budget has stagnated, the government has boosted expenditure on buying military hardware like fighter jets, tanks and warships and building infrastructure like roads and bridges on the borders. It will spend Rs 22,000 crore on capital expenditure.

Government officials drew attention to the hike in the capital budget. Defence minister Rajnath Singh termed the “nearly 19 per cent increase in defence capital expenditure” as the “highest ever increase in capital outlay for defence in 15 years”.

One of the big concerns in India’s defence budget has been the galloping pensions component. The pensions pie grew 13 per cent, from Rs 1.17 lakh crore to Rs 1.33 lakh crore last year, making it the second-largest component of the Rs 4.71 lakh crore defence budget, just below the revenue part but more than the capital expenditure. It dipped to Rs 1.25 lakh crore in this year’s Revised Estimates. This year, however, defence pensions were just Rs 1.13 lakh crore, less than the capital expenditure.

A defence spokesperson attributed last year’s rise to the "approximately Rs 18,000 crore that was to be paid on account of pension arrears". There is a very real possibility, defence budget watchers say, that parts of the pension bill have been deferred and could perhaps resurface under the Revised Estimates later this year.

Defence experts have welcomed the hike in the capital-expenditure budget. "This is the first time that the MoD budget is driven by capital expenditure which was not the case earlier,” says Laxman Kumar Behera, associate professor, Special Centre for National Security Studies at the Jawaharlal Nehru University.

The government had already indicated way back in 2018 that it was unlikely to increase defence expenditure. Defence accounts for over 15 per cent of central government spending and is the second largest expenditure head of the government after debt servicing.