Bill for pensions zooms past Rs 1 lakh crore mark; sharp increase in funds to assist private sector.

New Delhi: Given a modest 7.84 per cent hike, the defence budget failed to throw up any surprises this year, with a majority of the allocation going towards maintaining India’s large, manpower-intensive armed forces.

The good news in the budget has been that the armed forces have managed to spend all funds allocated to them for modernisation in the last financial year, a rare achievement given that in the past, money has routinely been returned to the exchequer due to an inability to execute projects at the final stage.

However, the ballooning pension bill is a cause of concern, with defence pensions crossing the Rs 1 lakh crore mark this year. While it has traditionally not been counted as part of the defence budget, the pension’s bill for the armed forces this year (at Rs 1.08 lakh crore) is a sharp 26 per cent rise compared to the last allocation. Besides, the government will also foot a salary bill for serving personnel that comes to Rs 1.15 lakh crore in the coming year.

This means that India will now be spending more on pensions than on modernising and re-equipping the three armed forces. The capital allocation this year is pegged at Rs 99,000 lakh crore, up from Rs 86,339 last year.

This will give the armed forces slightly more elbow room to make purchases but do not cater to big-ticket projects that are in the pipeline. Major procurements lined up include a plan to manufacture new single engine fighters in India as well as a naval programme for acquiring a new line of conventionally powered submarines.

However, given the long gestation period for completing the procurement cycle, it is unlikely that either of them will get finalised in the coming financial year. India will spend 1.57 per cent of its GDP on defence in 2018-19, a number that has been on a decline for the past several years. This decline is a sore point for the armed forces that have repeatedly suggested that the budget should be pegged at 2 per cent of the GDP.

However, in terms of total capital expenses that the government will undertake in the coming financial year, over 33 per cent will be made for capital purchases of the armed forces, a number that is regularly used by the bureaucracy to make the point that India is spending adequately on the sector.

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