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INDIA LOWERS DEFENCE SPENDING IN GDP TERMS

INDIA LOWERS DEFENCE SPENDING IN GDP TERMS
By Bulbul Singh

02 Mar 11. India, which plans to spend over $100bn over the next five years to buy new weapons and equipment, has increased defence allocation by nearly 11.48 per cent for the next financial year. Total defence outlay has been fixed at $36.5bn as against $32.7bn in the financial year 2010-2011.[calculated at the rate of 1 USD to 45 Indian Rupees].

India’s neighbours China and Pakistan are estimated to be spending over $90bin and $10bn annually respectively to meet their defence needs.

Compared to China’s 7% and Pakistan 5%, India’s defence budget continues to be around 2% of GDP. However, in terms of GDP, defence spending for the next financial year has fallen from 2.12% in the current financial year (2010-11) to 1.96% in the next financial year.
India currently imports nearly 70% of these weapons and equipment from overseas countries, this trend is likely to remain the same over the next five years.

Given the average 8% growth of the Indian economy, India is likely to spend around $150bn over the next seven years on fresh weapons and equipment purchases, of which $15.37bn has been budgeted.
Under the capital formation part of the budget the Indian Army would get $4.22bn, the Indian Navy $2.94bn and the Indian Air Force (IAF)$6.6bn.

In contrast to previous years, the Indian defence ministry was able to spend all the funds allocated for buying fresh weapons and equipment and in fact spent around $196m more than the allocated funds. In the previous five years, around $1bn was surrendered each year as unspent money from the budget ‘Head Capital Outlay’ which is meant for buying fresh weapons and equipment.

In another sharp contrast, the Indian defence ministry has budgeted less money for the Indian Navy compared to actual spending last year. The Indian Navy proposes to spend $2.94bn in the next financial year, compared to actual spending of $3.31bn. “This is not an indication that India will spend more on the Indian Navy.” said an official of the Indian defence ministry adding that, “More emphasis has been paid for spending on Army and Air Force projects for fresh equipment next year, as some contracts are likely to be finalized, including the $4.5bn C-17 deal and the purchase of 145 ULH guns from the United States. Besides, the purchase of 197 Light Utility helicopters for both the Indian Army and Air Force is likely to be finalized in the next financial year.

“The Indian Navy and Air Force have been getting more funds under the Capital Outlay over the last five years, neglecting the Indian Army.” said a senior Indian Army officer.

“The Indian Navy bought four additional P8I Long Range Maritime Reconnaissance Aircraft from the United States on government-to-government basis, just before President Obama’s visit to India in November last year. This was not planned thus increasing the overspend for the Indian Navy.” explained one Indian Navy official.

In the ‘Capital Outlay’ the Indian Army will get $4.22bn for buying equipment, as against the actual spending of $3.43bn last year.
The IAF has also received jump of around 24% as $6.6bn has been budgeted compared to $5.32bn last year. It is currently coping with falling fleet strength due to old age retirement and delayed acquisition.

The IAF has meanwhile chalked major acquisition and overhaul programs over the next five-to-seven year’s worth over $50bn to increase its combat potential. The $10bn MRCA purchase of 126 aircraft is already in the acquisition process, while the $1.5bn upgrade of the Mirage fleet is expected to be inked in the next one-to-two months. In addition, it will buy utility helicopters to replace the Cheetah and Chetak and purchase C-17 aircraft.

Under a $3bn purchase program, the IAF will procure new generation air-to-air missiles, air defense systems and precision guided munitions. All the force multiplier aircraft, including the Mirage 2000H, Sukhoi 30MK

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