Rs. 5,000 cr hike for Defence, 49 per cent FDI allowed

NEW DELHI (TIP): Finance and Defence Minister Arun Jaitley in his budget speech on July 10 announced that foreign companies would now be allowed 49 per cent stake in companies involved in manufacturing military equipment — a clear signal of the Modi Government’s aspiration to infuse foreign capital to modernise the domestic defence industry. The fresh policy direction from the government is accompanied with the Rs. 5,000 crore hike in defence allocation over the previous interim budget. However, the pattern of the modest increase reveals the government’s intent to step up modernisation of the Army, along with a renewed focus on indigenously developed weaponry.

Jaitley also announced that Rs. 1,000 crore were being earmarked for strategic railway projects in border areas, a decision that resonates with bouts of tension that are yet to abate along India’s borders with Pakistan and China. A similar amount was allocated to fine-tune the “one rank one pension” scheme for the armed forces. Out of the total allocation of Rs.2,29,000 crore, the Army has got Rs. 1,18,867.23 crore, which is 51.91 per cent of the total defence kitty. But significantly, a sum of Rs. 25,197.91 crore — much more than the allocation in the interim budget — are to be spent on the capital head, signalling a fresh thrust on inducting new equipment in the Army, which is in the process of raising a mountain strike corps, equipped with a “Quick Reaction Force,”armed with credible aviation assets.

Significantly, the budget allocates Rs. 2,127.99 crore for aircraft and aero-engines, marking a nearly 80 per cent increase over the previous budget under this head. The capital intensive Air Force gets Rs.53,817.02 crore — a 23.50 per cent of the total. The navy, which is going ahead with its new submarine and aircraft carrier projects, has been allocated 15.36 per cent of the total budget, with Rs.21,190.93 crore being channeled under the capital head. With the government focusing on indigenously developed weaponry, the Defence Research and Development Organisation (DRDO) has got Rs. 15,282.92 crore, amounting to 6.67 per cent of the total. But when combined with Rs.2,481.99 crore allocated to ordnance factories, the combined figure jumps to 7.75 per cent of the total.

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