India Military Sees Tiny Budget Rise Despite Modernization Plan

(Bloomberg) -- India increased its planned defense spending by about 5%, a marginal rise that casts doubts on its longstanding plans to modernize its military even as a protracted standoff with China along their disputed Himalayan border continues.

Overall, military spending increased to 3.85 trillion rupees ($51.5 billion), up from 3.68 trillion rupees a year ago, according to the budget unveiled on Tuesday. India's expenditure is about a quarter that of China's which pegged it at over $200 billion last March, an increase of 6.8%, according to data from the Center for Strategic and International Studies.

The minuscule increase raises questions about New Delhi's ability to buy new equipment and induct cutting edge technology as its borders with both Islamabad and Beijing remain hostile.

Of the total defense spending, the amount earmarked for the acquisition of new weapons and technology is 1.52 trillion rupees for the fiscal year starting April. The military got about 1.39 trillion rupees in the year that ends March 31 this year, the documents showed.  

“Over the past decade, gap between the requirements projected by the services and the actual allocation, has widened to Rs 1.03 trillion from Rs 230 billion, ” said Atul Cowshish, a former financial adviser to the Ministry of Defense.  “The funds are not needed tomorrow, but there has to be provisioning.”

In her speech to parliament, Finance Minister Nirmala Sitharaman also reiterated the government's position that New Delhi will reduce its reliance on imports to revamp its military.

“Our government is committed to to reducing imports and promoting self reliance in equipment for the armed forces,” she said. Some “68% of the capital procurement budget will be earmarked for domestic industry” this year, up from 58% last year.

India had previously announced plans to spend $250 billion over a 10-year period to 2025 on defense modernization, focused on upgrading its aging fleet of fighter jets, submarines, battle tanks and armored vehicles. But budget restraints and a renewed focus on the domestic manufacturing of weapons have put that time line in doubt.

And while India is among the world's top five military spenders, most of the funds allocated for defense forces go toward the salaries of about 1.3 million serving personnel, pensions, infrastructure development, and repairs.

The Indian Army currently has 93 modernization projects planned with a total estimated value of $18.4 billion, while the air force needs another $15 billion just to pay for new fighters to replace its aging fleet. The navy has also said it needs about $5 billion to build six conventional diesel electric submarines. 

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