NEW DELHI — India's defense spending will rise by about 10 percent in the next financial year to $40.29 billion, from $36.61 billion in the previous financial year.

Analysts, however, say the hike is insufficient, as it will merely compensate for inflation and pay for past commitments, leaving fewer funds to buy new weapons and equipment.

"The rise will just about take care of the purchase of 36 Rafale fighter jets from France at $8.8 billion [contracted November 2016] and pay for past commitments, and giving practically no funds to replace the aging Soviet-era weaponry," according to defense analyst Nitin Mehta.

Apart from the Rafale contract, additional funds will be used to pay for $3 billion worth of weapons from Russia and Israel, for which India signed in late 2016 to offset the depleting stock of anti-tank missiles, tank engines, rocket launchers and various kinds of ammunition. Only partial payment was made for these contracts.

Under the Capital Acquisition Head — the budget for fresh purchases of armaments and weapons systems and covering previous, incomplete defense contracts — Finance Minister Arun Jaitley allocated $12.65 billion for the next financial year, an increase of 9.3 percent from last year's $11.47 billion.

However, the Ministry of Defence (MoD) left $1 billion unspent from last year's Capital Acquisition Head due to delays by the MoD in clearing defense deals.

"Inability to utilize all the funds allocated is a trend witnessed in the last few years, which reflects poor optimization of resources allocated due to bureaucratic delays," an Indian Army official said.

"The Indian Air Force urgently needs to induct AWACS, surveillance platforms, self-protection suites, precision-guided munitions, and secure communication and networked systems. We are already well behind the induction schedules," said Daljit Singh, a defense analyst and retired Indian Air Force (IAF) air marshal.

India has been cutting defense spending for several years. "Since 2009-10, budget defense expenditure has dropped from 2.19 percent of the gross domestic product to only 1.65 percent," Mehta said.

Justifying the budget allocation, Amit Cowshish, a former financial adviser with the MoD, said: "It has to be recognized that there are serious limitations on the government's ability to raise its revenues and consequently on how much it can allocate."

Several projects that are in the final stages of procurement and are awaiting funding include:

  • Purchase of 473 software-defined radios for IAF.
  • Acquisition of 56 C-295 transport aircraft at a cost of $3.5 billion from Airbus.
  • Purchase of 280 aero engines from Honeywell at a cost of $2 billion for the Jaguar aircraft.
  • Purchase of 100 tracked artillery guns at a cost of $700 million from Larsen & Toubro for the Army.
  • Procurement of four landing platform docks at $2.6 billion for the Navy from domestic shipyards.
  • Procurement of 12 mine countermeasures vessels at $5 billion from Goa Shipyard.
  • Purchase of an additional three C-130J transport aircraft at a cost of $670 million and six C-17 Globemaster aircraft at a cost of $2.64 billion.
  • Funds will have to be allocated to meet the $10 billion worth of deals between India and Russia from October 2016, which include the purchase of S-400 Tiumf air defense systems and four stealth frigates, as well as the formation of a joint venture to manufacture 200 Kamov-226T light utility helicopters in India.

India needs $233 billion to meet its weapons and equipment requirements in the next 11 years, according to the MoD's "Long Term Integrated Perspective Plan 2012-27." As such, the country will need to hike its spending each year by 10 percent.

Defense spending is part of the annual budget allocations for 2017-18, announced in Indian Parliament here on Feb. 1. The upcoming financial year will begin April 1, 2017, and end March 31, 2018.

Vivek Raghuvanshi is the India correspondent for Defense News.

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