Defence Budget increased, but still less than 2% of GDP

New Delhi : The allocation for the Defence Ministry in the Union Budget 2018-19 stands at Rs 2,95,511 crore, an increase of a little less than six per cent over the Revised Estimate of last year.

This is around 1.59 per cent of India's Gross Domestic Product (GDP). Experts have in the past suggested that the Defence Budget should be at least 2.5 per cent of the GDP.

Finance Minister Arun Jaitley also announced that two defence production corridors will be developed in the country, and a new Defence Production Policy will be formulated to promote defence manufacturing in the domestic sector.

He said that the development of border infrastructure is a priority, and announced that a new tunnel will be build under the Sela Pass in Arunachal Pradesh, in an area that China claims as its territory.

A Defence Ministry statement said the Defence Budget accounts for 12.10 per cent of the total central government expenditure for 2018-19, which is Rs 24,42,213 crore.

The allocation for Defence for 2018-19 is 7.81 per cent -- up from the Budget Estimate of Rs 2,74,114 crore in 2017-18, and 5.91 per cent over the Revised Estimate of Rs 2,79,003 crore.

The Budget Estimate for any Ministry or scheme is the amount allocated to it in the Budget papers for the following year. The Revised Estimates are later-year estimates.

The allocation under the head of Revenue Expenditure, which includes expenditure on pay and allowances and other regular expenses, was as much as Rs 1,95,947.55 crore.

In contrast, the Capital Outlay, which includes expenditure related to modernisation of the forces, was Rs 99,563.86 crore, almost half of the Revenue Expenditure. However, this is 33.1 per cent of the total central government expenditure on Capital Account, which is Rs 3,00,441 crore.

The Capital Outlay for the Army is Rs 26,688.42 crore, for Navy Rs 20,848 crore and for Air Force Rs 35,755 crore.

The Finance Minister, meanwhile, said that the government has "opened up private investment in defence production, including liberalising foreign direct investment", and announced the development of "two defence industrial production corridors in the country".

While Jaitley did not mention where the corridor will be set up, Defence Minister Nirmala Sitharaman, in a statement, hinted it would be in Tamil Nadu.

The Minister said the Department of Defence Production had conducted a major Defence Industries Development Meet in Chennai in January 2018 with huge participation from defence industries, including MSME from Chennai, Mysore, Coimbatore, Salem, Tiruchirappalli, and from other states as well.

The Minister added that the announcement has "paved the way for setting up the first Defence Production Corridor in Tamil Nadu".

She welcomed the measure and said: "These are the first ever Defence Production Corridors being set up in the country. These corridors will give a big boost to defence production in the country."

Jaitley also announced that an underpass would be build under the Sela Pass in Arunachal Pradesh, a high-altitude mountain pass on the border between Tawang and West Kameng districts, an area China claims to be a part of south Tibet.

"To secure India's defences, we are developing connectivity infrastructure in border areas," said Jaitley.

He said that work of constructing a 14-km tunnel at the Zoji La Pass is progressing well.

Lauding the armed forces, the Finance Minister said they have played a "stellar role" in meeting challenges faced on the borders as well as in internal security.

"I would like to place on record our appreciation for the efforts and the sacrifices made by the three services in defending the interests of the nation," he said.

For defence pensions, an amount of Rs 1,08,853.30 crore has been allocated, apart from the overall allocation for the Ministry.

With increased pensions following implementation of 'One Rank One Pension' scheme and the 7th Pay Commission recommendations, this denotes a hike of around 26.60 per cent over the Budget Estimate of the last financial year which was around Rs 85,740 crore, and 14.36 per cent more than the Revised Estimate of Rs 95,000 crore in 2017-18.