Graphic: Defense Budget 2013

India’s defense budget announced last week as part of the Union Budget last week appears to have received mixed responses.

While some media reports indicate an increase in the budget, for practical purposes, the budgetary increase appears to be little to crow about.

This is because while the overall budget may have seen a modest increase in terms of numbers, it is barely a gain after taking into account inflation and the comparative value of the rupee against the dollar, which is especially important when examining the outlay for capital acquisition, a substantial amount of which is conducted in foreign exchange.

The capital acquisition outlay of the armed forces has largely followed the general pattern of the defense budget over the past few years, which indicates that the overall defense budget is mostly sensitive to costs of capital acquisition.

Indian expenditure on naval dockyards is set to increase sharply, to go up from INR 771.68 crore in the Revised Estimate for 2012-13 to INR 2011.17 crore this year.

While the air force has naturally been the largest beneficiary of capital expenditure on aircraft and aero-engines, the army remains the largest spender on heavy and medium vehicles.

Although capital expenditure on the Indian naval fleet and special projects has remained mostly the same, the capital expenditure under the head ‘Other Equipment’ has risen steadily over the past three years, with the Indian Air Force (IAF) overtaking army expenditure under this head this year.

Capital Expenditure on ordnance factories has increased steadily over the last three years, but it appears that most of the budget for ordinance factories is spent on manufacturing and stores.

Rashtriya Rifles capital budget falls

What’s notable is the drop in the capital expenditure on Rashtriya Rifles, the counter-insurgency force, staffed by the Indian Army personnel. What’s also interesting is that while the government appears to have managed to spend only INR 8.5 crore of the sanctioned INR 37 crore last year on the capital outlay on the Ex-serviceman Contributory Health Scheme (ECHS), it has still earmarked INR 30 crore for it this year. It spent INR 2.63 crore in the financial year 2011-12.

So does the NCC budget

While the government had budgeted INR 50 crore on the National Cadet Corps (NCC) last year, it managed to spend only INR 1.5 crore in 2012-13. It has now budgeted INR 5.5 crore this year.
Great expectations from CSD

Interestingly, the government is expecting the Canteen Services Department (CSD) to make a significant profit this year. Last year it made INR 7.87 crore in net revenue, despite budgetary expectations of net expenditure of INR 706 crore after it spent INR 595.47 crore in 2011-12. This budget expects the CSD to show a revenue of INR 212.5 crore over and above total expenditure on it.

Note: 1 crore = 10 million

All graphics by Shruti Pushkarna.