India announces over Rs4 trillion defence budget

NEW DELHI: India on Saturday announced its ambitious defence budget amounting to 2.47 trillion Indian rupees ($40.07 billion, almost 4 trillion Pak rupees) a 7.9 percent increase for the fiscal year starting April 1, suggesting that it will move only gradually with the military’s long wish list for fighter jets, ships and artillery as Narendra Modi’s government presented its first budget.
After years of neglect, India is trying to narrow the military gap with China, which has been building up its fleet of ships and submarines making forays in the Indian Ocean.
Finance Minister Arun Jaitley, unveiling the federal budget for 2015/16, said defence spending would rise to 2.47 trillion Indian rupees ($40.07 billion). For the current fiscal year, the allocation was 2.29 trillion rupees, a jump of 12 percent over the previous year.
“Defence of every inch of our land is above everything else,” Jaitley said.
But the limited rise in the military budget - three-quarters of which is spent on maintaining the world’s third largest standing force - means only some new weapons will be ordered this year.
Gurmeet Kanwal, a retired brigadier and fellow at the Vivekananda International Foundation, a New Delhi think tank with ties to the government, said the state has to make initial down payments for a range of pending orders.
He listed them as 126 fighter aircraft from Dassault, 197 light helicopters, 145 Ultra-light Howitzers, 15 Apache attack helicopters and 22 CH-47F Chinook medium lift helicopters.
The navy needs new submarines and stealth ships to counter the Chinese presence in the Indian Ocean, which New Delhi has long seen as its sphere of influence.
China is expected to authorise robust 2015 defence spending this coming week despite its slowing economy, largely to beef up the Navy with anti-submarine ships and develop more aircraft carriers beyond the sole vessel in operation.
Last year, the two giant neighbours were locked in a stand-off on their disputed Himalayan border that cast a shadow on President Xi Jinping’s first summit meeting with Indian Prime Minister Narendra Modi.
But economic ties have rapidly expanded between the two countries and Modi is expected to visit China later in 2015.
Arun Jaitley pledged major investment in infrastructure saying it was time for the economy to “fly.”
He said his government had inherited an economy dominated by “doom and gloom” when it took power last year, trumpeting its achievements in conquering inflation and kick-starting growth. “The credibility of the Indian economy has been re-established. The world is predicting this is India’s chance to fly,” he said.
Jaitley said the government would increase spending on the country’s crumbling roads, railways and ports by $11.3 billion in 2015/16 as it sought to win back investment and boost growth. He pledged to complete 100,000 kilometres of roads currently under construction, build another 100,000 kilometres and commission five “ultra mega” power projects to help end electricity shortages.
The government will set up tax-free infrastructure bonds to finance its plans through a national fund that will receive a 200-billion-rupee injection of public money.
Jaitley also announced plans for a universal social security system that would give poor Indians access to subsidised insurance and pensions. A new insurance scheme will provide coverage for accidents and death for just 12 rupees — less than 20 US cents — a year for India´s poorest.
The government also plans to set up a basic pension scheme for the millions of Indians currently unable to afford to put money aside for their old age, Jaitley said.
Jaitley announced plans to cut the corporate tax rate from 30 to 25 percent over the next four years and replace a wealth tax with a two-percent levy on the super rich.
He said India had been “losing on both counts” because it was perceived by investors as a high tax economy, but realisation was very low due to the high number of exemptions.
The government has forecast that growth for 2014/15 will reach 7.4 percent, making it the world’s fastest growing major economy.