India Thursday hiked its military spending to Rs 203,672 crore (Rs 2.03 trillion/$37 billion), an increase of five percent over the Rs.193,407 crore outlay for 2012-13 but an increase of 14 percent in real terms.
The budget hike, in real terms, amounts to Rs. 25,168 crore ($4.57 billion) over the revised estimates of Rs 178, 504 crore for the fiscal ending March 31. It translates into 14 percent increase.
The finance ministry had reduced the defence ministry's capital expenditure in the current fiscal by Rs 10,000 crore in its revised estimates, pegging it at Rs 69,579 crore from the initial figure of Rs.79,579 crore.
"I propose to increase the allocation for defence to Rs 203,672 crore. This will include Rs 86,741 crore for capital expenditure," Finance Minister P. Chidambaram said in his budget speech in the Lok Sabha.
The capital expenditure outlay of Rs 86,741 crore marks a hike of Rs 7,162 crore over last year's budget estimates and Rs 17,162 over the revised estimates.
Chidambaram said Defence Minister A. K. Antony "has been most understanding".
"I assure him and the house that constraints will not come in the way of providing any additional requirement for security of the nation," he said.
On his part, Antony said Chidambaram had been fair to the defence sector.
"Factoring the current economic scenario, he has been fair to the defence sector also by increasing the budget and assuring that should there be any urgent need in future, the same would be provided," Antony said.
The money allocated for capital expenditure will go towards the procurement of new weapons and systems and towards meeting committed liabilities in the form of payments for contracts signed in previous years.
India is in the process of finalizing a $20 billion contract for 126 Rafale medium multi-role combat aircraft.
It has already signed contracts for 10 C-17 transport planes for $4.1 billion and upgrading 49 Mirage-2000 combat jets for $2.4 billion, both in 2011.
Of the capital expenditure, Rs 33,776 crore will go for towards towards aircraft and aeroengine purchases for the three services of which Rs. 25,539 crore will go to the air force alone.
India will spend Rs. 23,457 crore on other military equipment, apart from Rs.2,080 crore on heavy and medium vehicles. It will also utilise Rs.5,552 crore of its defence capital expenditure on research and development.
The Army will get the lion's share of the ministry's non-plan outplay at Rs.81,833 crore for 2013-14. The non-plan outlay for the Indian Air Force has been pegged at Rs.18,295 crore and for the Indian Navy at Rs 12,194 crore.