Defence Budget 2019-20
(Source: Indian Ministry of Defence; issued Feb 01, 2019(
Union Budget for the financial year 2019-20, presented by the Finance Minister in the Parliament today, envisaged a total outlay of Rs. 27,84,200 crore. Out of this Rs. 3,18,931.22 crore has been earmarked for Defence (excluding Defence Pension). For Defence Pension, an amount of Rs. 1,12,079.57 crore has been provided in BE 2019-20.

Total Defence Allocation, including Defence Pension, accounts for 15.48% of the total Central Government expenditure for the year 2019-20.

The allocation of Rs. 3,18,931.22 crore represents a growth of 7.93% over Budget Estimates (2,95,511.41 crore) and 6.87% over Revised Estimates (Rs. 2,98,418.72 crore), respectively for the financial year 2018-19.

Out of Rs. 3,18,931.22 crore allocated for the financial year 2019-20, Rs. 2,10,682.42 crore for Revenue (Net) expenditure and Rs. 1,08,248.80 crore for Capital expenditure for the Defence Services and the Organisations/Departments under the Ministry of Defence.

The amount of Rs. 1,08,248.80 crore allocated for Capital expenditure, includes modernisation related expenditure. The Capital Allocation of the Ministry of Defence under BE 2019-20 is 32.19% of the total Central Government Capital Expenditure, which is Rs. 3,36,293.00 crore.


Defence Budget 2019-20: The Slide Continues
(Source: Institute for Defence Studies and Analyses; issued Feb 04, 2019)
By Vinay Kaushal
The public discourse in the recent past has been focussed on one particular defence acquisition and speculation as to the reasons why the number originally decided was changed. As a result, what has become lost sight of is the single most important constraint confronting the armed forces, namely, the defence budget.

Defence expenditure as a percentage of the Gross Domestic Product (GDP) has been declining steadily during the last several years. In the interim budget for 2019-20 presented to Parliament on February 1, this trend continues. (See Chart 1).

Chart 1 retains the consistency of what is recognised as defence expenditure, notwithstanding rationalisation in the demands in Budget 2016-17 and some reversals in 2017-18. It does not mean that the absolute amount allocated has been reducing, only that the increase has not kept pace with the growth rate of economic activity (see Table 2). As mentioned by the Finance Minister in his speech, the defence budget will be crossing the Rs 300,000 crore mark for the first time.

But this increase in the absolute amount of allocations has not resulted in an increase in the purchasing power of the resources for three main reasons.

Firstly, changes in the exchange rate of the rupee influences the purchasing power of the capital budget whether the acquisitions of weapons and equipment are made from external sources, which have to be paid for in foreign exchange), or Defence Public Sector Undertakings (DPSUs), which import the material required for producing defence use items, or even private sector companies which have to be reimbursed for Exchange Rate Variation (ERV) between the time a contract was signed and the time when they procure the material from foreign sources).

Further, a major part of the non-salary portion of the revenue budget, i.e., stores and fuel, is also impacted by the exchange rate for the same reasons mentioned above with respect to the capital budget. Table 1 below indicates in percentage terms the year-on-year increases in the defence budget as well as the variation in percentage of the annual average exchange rate of the US Dollar.

Click here for the full story, on the IDSA website.


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