Union Budget 2021 | LAC stand-off factored in for defence outlay

₹21,326 crore more for capital expenditure; in 2020-21, ₹20,776 crore allocated additionally for emergency procurements

Against the backdrop of the stand-off with China and an impetus for military modernisation, the allocation for capital expenditure in the defence budget saw an increase of ₹21,326 crore, or 18.75%, from the Budget estimates of 2020-21.

This is the highest increase in capital outlay for defence in the past 15 years, a release said.

Budget data also show that the armed forces got an additional allocation of ₹20,776 crore under capital expenditure in 2020-21 for emergency procurements in the face of massive mobilisation along the Line of Actual Control (LAC).

The total allocation for defence in the Union Budget at ₹4.78 lakh crore, including for defence pensions, saw a marginal increase of 1.48% from the ₹4.71 lakh crore last year. The allocation for 2021-22 stands at ₹3.62 lakh crore, excluding defence pensions, which stood at ₹1.16 lakh crore. Excluding defence pensions, the increase is about 7.34%, up from ₹3.37 lakh crore to ₹3.62 lakh crore.

Pension dip

However, data show that defence pensions have gone down significantly from the Budget estimates of 2020-21.

The capital allocation for 2020-21 was ₹1.13 lakh crore, which went up to ₹1.35 lakh crore for 2021-22.

Budget data show that in 2020-21, the armed forces got an additional allocation of ₹20,776 crore under capital expenditure in the revised estimates, largely to cater to emergency procurements due to the LAC stand-off.

As the stand-off began with China in May last year, the Army deployed 50,000 troops and equipment along the LAC in eastern Ladakh.

The Indian Air Force (IAF), too, forward-deployed its frontline fighters. The services also went in for a series of emergency procurements, including equipment and extreme weather clothing for the troops deployed in the high-altitude areas in peak winter.

Last month, the Chief of the Army Staff, Gen. Manoj Naravane, said that 38 deals, estimated at ₹5,000 crore, were made last year through the “emergency and fast track” route and in addition, capital procurements for ₹13,000 crore were concluded.

The defence pensions saw a significant dip from ₹1.34 lakh crore in the Budget estimate of 2020-21 to ₹1.25 lakh crore in the revised estimate and further to ₹1.15 lakh crore allocated for 2021-22. From 2020-21 to 2021-22, this represents a decrease of ₹17,775 crore or about 13.4%.

The 15th Finance Commission observed it its report that the expenditure on defence services as a proportion of GDP declined from 2% in 2011-12 to 1.5% in 2018-19 and to 1.4% in 2020-21.

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