A Marginal Increase In Defense Budget Reels Under 9.5% Fiscal Imbalance In The Budget 2021

Defence Budget  increased from Rs 4,71,000 crores to Rs 4,78,000 crores. Pension bill reduced from Rs 1,33,000 cr. to Rs 1,15,000 crores. Marginal increase in Capital budget at Rs 1,35,060 crores. from Rs 1,13,000 last FY. Capital budget is for the Modernisation fund for the armed forces.

Defence Budget has been hovering around 1.5 to 1.6 % of the national GDP which. India's net budget allocation for Defence in year 2020-21 was about 3.37 lakh crore minus pensions.

There was no mention of defence budget by FM in longest speech. the impact of Fiscal  burden at 9.5 % is evident in the overal defence budget.

In her speech, Sitharaman announced that India’s fiscal deficit is set to jump to 9.5 per cent of Gross Domestic Product in 2020-21 as per Revised Estimates. This is sharply higher than 3.5 per cent of GDP that was projected in the Budget Estimates. A slump in government revenues amid the Covid-19 pandemic has led to a sharp rise in deficit and market borrowing. The government plans to borrow another Rs 80,000 crore to fund the deficit this year. Gross market borrowings for next year has been pegged at Rs 12 lakh crore. 

This was Sitharaman’s third budget under the National Democratic Alliance (NDA) government led by Prime Minister Narendra Modi.

In the overall defnece budget, Pension bill has reduced from Rs 1,33,000 cr. to Rs 1,15,000 crores. This has been a contested area in the light of recent proposal by Department of Military Affairs ( DMA). DMA’s proposal like graded pension structure is in line to save on salaries and pensions which collectively account of half of annual defence budget.  

With such a marginal increase in defence budget, it is remained to seen as how armed forces navigate through the gaps. In 2018-2019 there was a massive gap of Rs 1, 12,137 crores between the requirement projected by the services and the funds allocated to them.

As Army Vice Chief Lt Gen Sarath Chand recently pointed out: Rs 21,338 crores capital allocation for the army’s modernization was insufficient to cater for the committed payment of 29,033 crore for 125 ongoing scheme.

In the last year's budget, defence forces were provided Rs 20,776 crore additional funds under the capital budget meant for modernisation of armed forces. In 2020-21, the three defence forces were also given emergency procurement powers in view of the situation along the China border.