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INDIA HIKES DEFENCE SPENDING

INDIA HIKES DEFENCE SPENDING BY OVER 17 PER CENT
By Bulbul Singh

21 Mar 12.India has hiked its budget spending for the next financial year, 2012-13 by 17.6 per cent at $38.68 million (1USD = 50 Indian Rupees) compared to defence budget of rival China at $106 billion and Pakistan $5.75 billion. The big ticket defence deals which are in the pipeline and will be finalized in the next financial year include the $11 billion MMRCA program, helicopters for the Indian Air Force, Army and Navy and Howitzers from BAE Systems. However, the hike, in real terms is only 13 per cent as India’s defence forces overspent the previous allocation spending $34.2 billion compared to the budget allocation of $32.8 billion. Of the $38.68 billion the money which has been earmarked for buying new weaponry is $15.9 billion, a 15.7 percent hike over last year’s allocation of $13.8 billion.

The Indian Air Force gets the largest slice from the budget, having been allocated $6 billion compared to $5.94 billion. The Indian Navy jumped from $4.6 billion to $2.6 billion last year. The Indian Navy is building warships to keep the current fleet of around 127 for the next ten years, as the majority of Russian-made aging warships are de-commissioned with new build being slower than the rate of scrappage. The Indian Navy is building the indigenous Kolkata class of guided-missile destroyers at a cost of around $3.5 billion. Shivalik class stealth frigates are being built under project Project 17 at a cost of around $1.8 billion, following the Russian-built Talwar class stealth warships. Domestic shipyards are currently building around 46 warships including the indigenous aircraft carrier and air defence ship. Another aircraft carrier, Admiral Gorshokov is currently in refit in Russia already costing over $1 billion more than planned.

The Indian Army has been allocated $3.77 billion compared to $3.8 billion last year. The Indian Army plans to buy a variety of military vehicles, air defence systems, howitzers and helicopters. Last year

India announced that it will buy weaponry and equipment worth $100 billion in the next ten years. This will generate offsets worth $30 billion, which will benefit the domestic defence industry. However, Indian defence ministry analysts and senior officials of said that the defence spending would be around $150 billion, given the shift towards strategic weapons in the recent past.

India remains one of the biggest buyers of weapons in the world and it depends largely on imports for its needs. Whilst emphasis has been given by Indian defence planners on the indigenous defence industry, no major defence JVs have taken up with overseas defence companies as the limit for investment by foreigners in the defence sector is restricted at 26 per cent.

The Stockholm International Peace Research Institute (SIPRI) in its new report said that India was closely followed by China and Pakistan whose weapons imports constituted 5 percent each of global sales. The share of domestic private sector defence companies has also not improved appreciably since the sector was opened up in 2001, mainly on account of their inability to compete with the state-owned defence companies. The share of the domestic private sector companies in the defence market is below $1 billion whereas the state-owned companies sell weapons and equipment over $4 billion.

In the years ahead the equation is likely to change as the Indian defence forces order big ticket weapons and equipment from India’s state-owned defence companies. The state-owned Bharat Dynamics Limited is likely to produce 10,000 tactical missiles at a cost of over $15 billion said a DRDO scientist.

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