Bharat Dynamics Ltd.’s Akash Weapon System, manufactured by the Defence Research and Development Organization, on display during the Aero India air show in Bengaluru. (Photographer: Dhiraj Singh/Bloomberg)  

Budget 2019: A 10 Percent Hike In Defence Capital Outlay

India’s allocation for capital expenditure on defence increased as Prime Minister Narendra Modi’s government plans to buy fighter jets and expand the naval fleet.

Capital outlay increased 10 percent year-on-year to Rs 1.03 lakh crore for 2019-20, according to the budget document. The capex contributes 24 percent to the total defence allocation, a marginal increase from the 23.2 percent share in the revised estimate for the ongoing financial year.

Finance Minister Piyush Goyal announced the total defence outlay, excluding pensions, of Rs 3.05 lakh crore for FY20. That compares with the revised estimate of Rs 2.85 lakh crore in FY19.

Including pensions, the defence budget increases to Rs 4.3 lakh crore versus Rs 4.05 lakh crore.

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Revenue expenditure of defence services, which includes salaries and administrative expenses, is pegged at more than Rs 1.98 lakh crore—about 46 percent of the total defence expenditure.

Capital Outlay

The capital outlay of Rs 1.03 lakh crore is split between the three forces.

Air Force

The total capex allocation for the Air Force for FY20 is the highest among the three forces at Rs 39,302.64 crore compared with Rs 24,811.61 crore in the revised budget for 2018-19. Of the total capex allocation, nearly two-thirds or Rs 24,807.19 crore would go into buying an upgrading aircraft and aeroengines. That’s largely to purchase aircraft from Hindustan Aeronautics Ltd. and France’s Dassault Aviation.

The government has already paid 25 percent of Rs 59,000 crore to buy Rafale jets from Dassault Aviation and the delivery is expected to start from September 2019.

Army

The capital outlay for the Indian Army is at Rs 29,447.28 crore, of which Rs 18,562.15 crore will go to other equipment.

Navy

Navy capex allocation is pegged at Rs 23,156.43 crore. It will spend close to Rs 12,182 crore to enhance its naval fleet.

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Pension

The outlay for the next year also saw an increase in provision for defence pensions by 5 percent to Rs 1.12 lakh crore. The rise largely stems from the implementation of the one-rank-one-pension in the last few years.

Miscellaneous

The government earmarked Rs 17,065 crore for miscellaneous expenditure by the Ministry of Defence.

Also read: Budget 2019: Is The 3.4% Fiscal Deficit Target For FY20 Credible?