The defence budget over the last three decades has generally varied between two to three per cent of the GDP, which corresponds to 13-17 per cent of the Central Government expenditure. This year’s allocation represents an 11.59 per cent growth over the previous year’s budget. It is only 1.83 per cent of the GDP, while last year (FY 2010-11), the defence budget was 2.12 per cent of the GDP.

Building a military capability is a long-term exercise. In the Indian context, it involves formulation of the 15-year long-term integrated perspective plan (LTIPP) by headquarters Integrated Defence Staff in consultation with the Service headquarters (Indian Army, Indian navy, and Indian Air Force (IAF)). The five years capital acquisition plan and the annual acquisition plans are derived from the LTIPP and form the basis of working out the capital budget for all major procurements during a year. The capital budget requirement of each service added to the revenue budget constitutes their overall budget demand during the year.

The security threats and challenges facing India have increased enormously. While the old adversarial threats due to unresolved borders remain, new threats and challenges like terrorism and insurgencies have been added to the old inventory. Thus India needs to prepare itself for the full spectrum of warfare ranging from low intensity conflict involving counter-insurgency and counterterrorist operations to conventional conflicts under the nuclear shadow on two widely separated fronts on its western and eastern flanks. The dilemma is only regarding the extent of emphasis that should be laid to acquiring each type of capability. Thus the requirements of the services are vast and wide-ranging.

The defence budget over the last three decades has generally varied between two to three per cent of the GDP, which corresponds to 13-17 per cent of the Central Government expenditure. The Union Budget 2011-12, presented to the Parliament on February 28, 2011, shows increased defence allocation of up to Rs. 1,64,415.49 crore ($36.50 billion). The annual increase in the budget has varied from as low as three per cent to a high of 34 per cent as witnessed in Fy 2009-10. This was due to the substantial increase in the revenue expenditure to cater to the enhanced pay and allowances sanctioned in the Sixth Pay Commission report. This year’s allocation represents an 11.59 per cent growth over the previous year’s budget. This year’s defence budget is only 1.83 per cent of the GDP, while last year (Fy 2010-11) the defence budget was 2.12 per cent of the GDP. The defence budget was accompanied by the usual remarks from the Finance Minister that “any additional requirement for the security of the nation will be provided for.”

The increase in the defence budget has resulted in an additional allocation of Rs. 17,071.49 crore over the previous budget of which Rs. 7,872.68 crore increase is in the revenue expenditure and the balance Rs. 9,198.81 for capital expenditure. Thus revenue expenditure has grown by 9.01 per cent to Rs. 95,216.68 and the capital expenditure by 15.33 per cent to Rs. 69,198.81 crore. From this capital outlay, the Army has got Rs. 18,986 crore, navy Rs. 5,688 crore, naval Fleet Rs. 7,320 crore and Air Force Rs. 30,699 crore. Assuming that 60 per cent of the capital acquisition budget goes for committed liabilities, the Ministry of Defence (MoD) will have around Rs. 27,680 crore ($ 6.15 billion) to pay for new acquisitions.