India has allocated $44.4 billion to defense for the fiscal year beginning April 1, up by 8.4% from the current fiscal year.
Of this, defense services will receive $35.74 billion, which includes capital procurement of $15 billion, an increase of 13.75% over this year.
India’s defense spending will represent about 2.72% of the country’s GDP — up from last year’s 2.41% — as figured in the budget announced Feb. 28. However, the budget falls short of reaching at least the 3% of the GDP that many were expecting. Investment in the sector also has lagged as a result of limited foreign direct investment in Indian defense ventures, which remains capped at 26%.
With an increased emphasis on homeland security following the Mumbai terrorist attacks of November 2008, budgets have steadily increased for police and paramilitary forces performing border and coastal surveillance. The allocation for homeland security is $10.17 billion, up from $8.75 billion this year. “There is no limit to the homeland security budget. Whatever is asked for, it is given,” an official said a few months ago.
“The total defense budget accounts for about 13.07% of the total central government expenditure,” says Nidhi Goyal, Deloitte’s director in India. “If the scope of national defense is enlarged to [include] national security, it would include expenses for civil defense, security aspects of the department of space, expenditurse of the ministry of home affairs, [and] research and development, which account for about 21.03% of [the] total government budget.”
Total defense services spending in India from 2001-11 has been increasing by a nominal compound average growth rate of 11.37% per year, Goyal adds.
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