Budgeting for India’s Defence: An Analysis of Defence Budget 2010-11 and the Likely Impact of the 13th Finance Commission on Future Defence Spending

The Union Budget 2010-11 has raised the defence outlays to Rs. 1,47,344 crore (US $31.9 billion). This represents a growth rate of a mere 3.98 per cent, in nominal terms (or 0.3 per cent in real terms) over the previous years’ allocation of Rs. 1,41,703 crore, and far below the 34 per cent nominal increase witnessed in the budget for 2009-10. The sudden dip in the defence budget’s growth rate follows two related steps taken by the government. While the first one is related to the government’s resolve about fiscal consolidation, the second is on account of the acceptance by the government of the recommendation of the Thirteenth Finance Commission (TFC). This commentary analyses the latest defence budget as well as the likely impact of TFC’s recommendation on India’s future defence spending.

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