New Delhi: The defence budget was increased by a mere 7.81% to Rs2.95 trillion against last year’s Rs2.74 trillion, belying expectations of a significant hike when the armed forces are facing growing challenge on the borders with both Pakistan and China.

In his budget address, finance minister Arun Jaitley said the government will develop two defence industrial production corridors and bring out an industry-friendly military production policy to promote defence manufacturing in India.

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Out of total allocation of Rs295,511 crore for defence budget, only Rs99,947 crore has been set aside for capital outlay to purchase of new weapons, aircraft, warships and other military hardware. The allocation has been estimated at around 1.58% of the GDP and 12.10% of the total budget of Rs2,442,213 crore for 2018-19.

Military experts said the allocation for defence budget was inadequate to modernise India’s armed forces when they are having to deal with an increasingly assertive China on the northern frontier and Pakistan’s continued hostilities along the western border.

“The allocation is not at all adequate for modernisation of our armed forces. The expectation was much more," said Dr Laxman Behera of Institute of Defence Studies and Analysis. Another expert Brig (retd) S. K. Chatterjee said the allocation was not in consonance with India’s security challenges along the western and northern borders and that the actual hike is marginal considering the inflationary pressure and increase in cost of military hardware compared to last year.

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The revenue expenditure which includes expenses on payment of salaries and maintenance of establishments has been pegged at Rs1,95,947 crore. Last year, the hike in defence budget was 6.2% compared to allocation in 2016-17. The increase was 9.76% for 2016-17 compared to 2015-16. A separate amount of Rs1,08,853 crore has been set aside over the above the total allocation for the paying pension to defence personnel. The amount for defence pension is an increase of 26.60% over the allocation of Rs85,740 crore last year.

In his budget speech, Jaitley appreciated the role played by the armed forces in meeting challenges on the country’s borders as well as in managing the internal security environment, both in Jammu and Kashmir and the Northeast. He said the government will develop two defence industrial production corridors. He, however, did not explain the contours of the project.

Jaitley said a lot of emphasis had been laid on modernising and enhancing the operational capability of the defence forces in the last three-and-a-half years. “The government will take measures to develop two defence industrial production corridors in the country," he said.

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Jaitley said the government would also bring out an industry-friendly “defence production policy 2018" to promote domestic production by the public sector, private sector and MSMEs. He said a number of initiatives had been taken to develop and nurture India’s intrinsic defence production capability to make the nation self-reliant on its defence needs. The minister said private investment in defence production had been opened up, including liberalising foreign direct investment.