DEFENCE

UNION BUDGET

What is union budget?Union budget classificationWho prepare union budgetCurrent status of IndiaMilitary budget of IndiaStatus of Indian defenceDefence budget: 2016-17Hike Three services and modernisationPension Indian defence over the last 9 yearsFocusBudget Forecasts

CONTENTS

Definition: According to Article 112 of the Indian Constitution, the Union Budget of a year is a statement of the estimated receipts and expenditure of the government for the fiscal year (1st April to 31st March).

Also referred to as the annual financial statement

The budget preparation process begins in Aug-Sept and generally presented in last week of February.

WHAT IS UNION BUDGET?

Union Budget is classified into:

- Revenue Budget : includes the government's revenue receipts and expenditure - Capital Budget : includes capital receipts and payments of the government.

UNION BUDGET CLASSIFICATION

The finance ministry is overall responsible for budget preparation The budget team comprising of :

WHO PREPARE UNION BUDGET

Finance minister : Arun Jaitley

Finance secretary : Ratan Watal

Revenue secretary : Dr. Hasmukh Adhia

Economic affairs secretary : Shri Shaktikanta Das

POSITIVES:

Growth of Economy accelerated to 7.6% in 2015-16. India hailed as a ‘bright spot’ amidst a slowing global economy by IMF (international monetary fund). Robust growth achieved despite very unfavourable global conditions Foreign exchange reserves touched highest ever level of about 350 billion US dollars.

CURRENT STATUS OF INDIA

NEGATIVES:

Risks of further global slowdown and turbulence.

Additional fiscal burden due to 7th Central Pay Commission recommendations and OROP.

CURRENT STATUS OF INDIA

The military budget : for the funding of the Indian Armed Forces

This military budget finances :• employee salaries and training costs• the maintenance of equipment and facilities• support of new or ongoing operations• development and procurement of new weapons, equipment, and

vehicles.

MILITARY BUDGET OF INDIA

Launch of several indigenously-developed capabilities across armed, naval and air forces

Scams and high-level of corruption marred the image of defence sector.

At present, India is one of the largest defence importers in the world sourcing over 70 per cent of requirements from other countries. 

STATUS OF INDIAN DEFENCE

The defence budget increased by 9.76% to Rs 2.58 lakh crore for the next fiscal as compared to the revised estimates of Rs 2.33 lakh crore for 2015-16 

Nearly 17.2 per cent of the total central government expenditure which is Rs 19.78 lakh crore

DEFENCE BUDGET : 2016-2017

Out of nearly Rs. 2,50,000 Crore allocated to the ministry, Rs.1,62,759 crore is allocated for Revenue expenditure.

It includes expenditure for : • Defence Ordnance factories• Research and Development• Rashtriya Rifles• Military Farms • National Cadet Corps.

DEFENCE BUDGET : 2016-2017

Defence budget hiked by nearly 10%

Reason : Defence Ministry unable to utilise the full capital budget

The capital budget has two components:• modernisation of the three services• land, capital works, the Defence Research and Development

Organisation (DRDO), ordnance factories, etc.

According to defence sources, 86 deals worth approximately Rs. 1,50,000 crore are close to the final stage of approval.

HIKE

The capital outlay for the three services(Indian Army, Indian Navy, and the Indian Air Force) for modernisation, stood at Rs 78,586.68 crore.

A major portion of the 'Modernisation’ budget represents committed liabilities.

Underutilisation of the major part(committed liabilities) :the deliveries/stage payment milestones were not achieved.

THREE SERVICES AND MODERNISATION

• Marginal increase of Rs 4287.07 crore in the capital expenditure of the three services which are in the process of modernising their equipment.

• The budget comes at a time when the three services are in the last stages of negotiations for multi-billion dollar deals for :

- Rafale fighter jets - Apache - Chinook and Kamov helicopters - M777 light weight howitzers.

• the total value of these projects exceeds the capital outplay.

• The Defence Ministry will have about Rs. 86,000 crore for the financial year 2016-17 to fund the purchase of the French made Rafale fighters, Medium Range Surface to Air Missiles (MRSAM) and Submarines for the Indian Navy

THREE SERVICES AND MODERNISATION

military pension zoomed to Rs 82,000 crore mainly due to the One Rank One Pension scheme (OROP).

(OROP) means armed forces personnel holding the same rank will get the same pension, regardless of the last drawn pay, years of service and the years served in a particular rank.

The highest jump has been in the pension expenses. While the revised estimate for the current fiscal was Rs 60,238 crore, it has jumped to Rs 82,332.66 crore for the coming financial year.

PENSION

1998 : Pokhran-II, a series of five nuclear bomb tests conducted at Pokhran

(Rajasthan) under the prime minister Atal Bihari Vajypayee regime.

1999 : Kargil War, which took place between May 8 and July 14, was

fought when Pakistani forces and Kashmiri militants were detected atop the Kargil ridges.

2001 : The defence sector was opened for private sector participation, with

100 % private sector ownership permissible and FDI of up to 26 per cent.

Tejas, India 's first indigenous Light Combat Aircraft (LCA) took its maiden flight.

INDIAN DEFENCE OVER THE LAST 9 YEARS

2002 : The Defence Procurement Procedure (DPP) was issued to streamline The acquisition process and transform the efficiency and transparency of defence

acquisitions

2009 : INS Arihant, India's first nuclear-powered submarine, was launched. Mumbai-based Adarsh Society came into limelight after it was alleged that senior

bureaucrats, army officers politicians were allotted flats in the society that was originally proposed to be

given to the widows of Kargil war.

2013 : AgustaWestland chopper deal scam broke out last year when it was found that

alleged kickbacks were given. Later, the deal was scrapped by the government.

INDIAN DEFENCE OVER THE LAST 9 YEARS

2014 : Currently 26 per cent FDI is permitted in defence manufacturing. The composite cap of foreign exchange is being raised to 49 % with full Indian

management and control through the FIPB route

2015 : Allocation for defence for 2015-16 raised to Rs 2,46,727 crore against Rs

2,22,370 crore in previous financial year.

2016-17: Customs duties exemption on direct imports of specified goods for defence

purposes by government of India or state governments being withdrawn, with effect from 01.04.2016

 Basic customs duty exemption on specified goods imported by contractors of government of India PSUs or sub-contractors of such PSUs for defence purposes being withdrawn, with effect from 01.04.2016

INDIAN DEFENCE OVER THE LAST 9 YEARS

NEW DEFENCE POLICY TO PUSH 'MAKE IN INDIA': OFFICIAL

The Defence Procurement Procedure 2016 : aims at making India self-reliant in defence equipment

The Make in India initiative by government of India is envisaged to develop skills and reduce dependency on foreign OEMs (original equipment manufacturers) in various areas of manufacturing, including electronic systems.

A step in this direction is the much-expected promulgation of Defence Procurement Procedure (DPP) 2016

The parliament standing committee :• Projected fund requirements• Budget allocations • Recommending additional allocation of funds.

Needs to focus on • The recurring underutilisation of BE under the capital budget • The underutilisation of revenue budget in the current financial

year.

Defence Minister Manohar Parrikar had recently directed all concerned to make concerted efforts to get the deals cleared in the next 4-5 months within the first quarter of the next fiscal. 

FOCUS

According to the Medium Term Fiscal Policy Statement presented by the Finance Minister

• During the projection period of 2017-18 and 2018-19 it (revenue budget) is estimated to increase by 10 per cent over previous years.

• Total Defence expenditure including the Capital component is estimated at about 1.6 percent of GDP in 2017-18 and 2018-19.

BUDGET FORECASTS

DONE BY :Sirisha – 66

Sunanda – 67Supriya – 68Alekhya – 69

Likitha – 70