The Defence Budget got a modest hike of 12.5 per cent for the next fiscal but the Government increased the FDI cap in the Defence production sector from 26 per cent to 49 per cent.
Capital outlay was also increased by Rs 5,000 crore to sustain ongoing modernisation and likely procurement of some weapon systems like 197 light helicopters for sustaining troops at Siachen, 22 Apache attack helicopters and 12 Chinook heavy lift helicopters besides raising Mountain Strike Corps to face any threat from China.
Finance Minister Arun Jaitley, who holds dual charge of the Defence Ministry, allocated Rs 2,29,000 crore for the next fiscal. This allocation is about 12.5 per cent more than last fiscal’s revised estimate amounting to Rs 2,03, 672 crore. Incidentally, this amount was about six per cent more than 2012-13 Defence outlay.
Moreover, the Interim Defence Budget presented by the UPA Government in February this year provided for Rs 2,24,000 crore which was about 10 per cent increase over 2013-14 fiscal.
Faced with the current economic status, Jaitley had to go in for the rather small hike even as the Defence establishment was pushing for a more than 25 per cent hike. In an effort to address the concerns of the armed forces over slow pace of modernisation and acquisition due to resource constraints, Jaitley said he was increasing the capital outlay by Rs 5,000 crore over the amount provided in the Interim Budget. This figure stood at Rs 89, 587.95 crore. The capital outlay in 2013-2014 was Rs 78,872 crore.
As regards ‘one rank one pension’ policy, the Government has set aside Rs 1,000 crore for this fiscal to do away with anomalies in pensions besides Rs 1,000 crore for accelerating development of railway system in the border areas. At least, 14 strategic rail projects, most of them in North-East and Himachal Pradesh besides Kashmir are pending. These projects are aimed at countering vastly superior Chinese rail system across the line of Actual Control in Tibet.
Agreeing to the long-standing demand of the industry to allow more FDI, Jaitley said the hike was now 49 per cent with full Indian management and control in order to develop indigenous industry.
Moreover, the Government set aside Rs 100 crore as Technology Development Fund to enable public and private sector companies including Small and Medium Enterprises to support research and development in developing Defence systems.
Increase in capital outlay may see Apache and Chinook helicopter deals now in the final stages of negotiations going through. These two deals will cost about 2.5 billion dollars.
Moreover, the budgetary hike will help the Army in speedily raising the Mountain Strike Corps meant to tackle any threat from China. Similarly, the 197 light helicopter deal worth over Rs 10,000 crore is also likely to get the go-ahead as the present fleet of Cheetah and Chetak helicopters are in the last phase of their operational life.