Money Falls Short

Gp Capt. A.K. Sachdev (retd)

As it always is, the 2023 annual budget preparation exercise was one of walking the tightrope between fiscal forces, political pressures and geopolitical goading. This was the last full budget by this government before the general elections next year and it was expected that the budget would have a populist slant. It did provide relief to a large section of the middle class by raising the income tax exemption limit to Rs 7 lakh in the new regime, but its ingenuity lay in introducing several social welfare schemes that could garner votes in the 2024 general elections.

The defence budget, always a tug of war between geopolitics and fiscal compulsions, was expected to factor in several compulsions: minor skirmishes with China in the recent past and the need to build infrastructure along the borders and the Line of Actual Control (LAC), an impending international recession, the Supreme Court diktat to the central government to pay one rank one pension arrears in full to veterans who have been waiting for four years, the internal upheaval in Pakistan, the Russian-Ukraine war with its implications for Indian defence equipment replenishment, and the critical need to modernise the defence forces for multi-domain warfare with either or both our inimical neighbours. What does this year’s budget portend for aerospace and the defence sector, both of which are connected?

Finance minister Nirmala Sitharaman on the Budget Day

Pre-Budget Expectations

The first advance estimates of growth released by the government on 6 January 2023 projected that the economy would grow at 7 per cent in FY 2022-23, a rate marginally higher than the 6.8 per cent projected by the Reserve Bank of India. It was less than the 8.7 per cent growth in 2021-22. The final economic survey projected a GDP growth of 6 to 6.8 per cent ‘depending on the trajectory of economic and political developments globally.’ It retained the expected growth rate in real terms at 7 per cent, as contained in the advance estimates. The budgeting exercise was thus based on a modestly healthy outlook. So were expectations from it.

According to unattributed reports, all three services had demanded substantially more funds (than the previous budget) in their pre-budget presentations to the ministry of defence and these were duly forwarded to the ministry of finance. There was also a demand for a non-lapsable fund for modernisation programmes of the services. This has been a longstanding demand, perhaps further reinforced by the fact that Rs 2,369 crore of last year’s capital outlay remained unspent at the end of 2021-22. Private players were also wishful of a large increase in defence capital expenditure allocation so that some of the largesse could flow their way.

Given the rumblings with China in 2022 and the constant refrain of the defence services as well as the government about modernisation, some analys