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India announces 18.75% increase in defence capital expenditure

01 Feb 2021 (Last Updated February 1st, 2021 17:45)

The Indian Government has announced an 18.75% increase in defence capital expenditure for the financial year 2021-22.

The Indian Government has announced an 18.75% increase in defence capital expenditure for the financial year 2021-22.

Finance Minister Nirmala Sitharaman announced Rs4.78tn ($63.75bn) allocation for the defence sector.

The minister revealed that it is a ‘historic push to defence modernisation’ and the ‘highest ever’ increase in capital outlay for defence in the past 15 years.

India Defence Minister Rajnath Singh said: “Based on six pillars of good governance this budget will usher India into a new era of inclusive growth and prosperity.”

It also represents an increase of 30.62% over FY2019-20.

Among the components allocated for defence, Rs1.35tn ($18bn) has been allocated for capital expenditure (capex).

Meanwhile, the pension component this year stands at Rs1.15tn.

The hike in defence expenditure comes amid the ongoing standoff with China at the Line of Actual Control (LAC) in Ladakh and over possible conflict concerns with Pakistan.

In a series of tweets, Rajnath Singh said: “Several new policies and programmes to support India’s farmers, agriculture, infrastructure and reinvigoration of human resource have also been announced. I am glad that the budget has proposed the opening of 100 new Sainik Schools in the country.”

The schools will be established in collaboration with states, non-governmental organisations (NGOs) and private institutions.

Last year, India announced a reduction in defence expenditure as the devastation caused by the Covid-19 pandemic forced government to shift their priorities towards other areas of the economy.