The document discusses India's defense expenditure trends and budget for 2015-16. It notes that the defense budget grew 8% to Rs. 246727 crore for 2015-16, with 53% going to the Indian Army. While revenue expenditure grew 13.2% to Rs. 152139 crore, capital expenditure remained unchanged at Rs. 94588 crore. The defense budget as a percentage of GDP declined to 1.75%, its lowest since 1962-63. The 14th Finance Commission may further impact defense allocations as it competes with other sectors for a smaller central funding pool.

1. Defence Expenditure in India-
An Overview

2. A Broad Perspective
The Defence expenditure of a country is determined by many
factors, both objective and subjective. These include:-
 The strategic environment and threat perception at a
particular time. This may lead to the problem of short-term
focus on defence and crisis management when things go
wrong.
 The view of the government regarding its responsibilities
towards the social, developmental and protective functions
of the state and the relative priorities accorded to these
functions.

3. A Broad Perspective
 The perceived opportunity cost of defence spending. The
more the social and developmental demands on the
government, the higher the opportunity cost of defence
becomes. But this is balanced by the ‘opportunity cost of
not spending on defence’, which implies a determination
and acceptance of the associated risk.
 The extent to which a government wishes to employ its
defence forces to support diplomatic initiatives (for
example, peace support operations) and as instruments for
disaster relief and the provision of essential services.
 Defence spending spin-offs. Where positive spin-offs for
the economic, technological and social development of the
country can be obtained, defence spending will receive
stronger national support. In this regard, the ‘Make in India’
policy initiative is a cause that all stakeholders must
wholeheartedly contribute to.

4. Defence Budget 2015-16
 Defence budget for 2015-16 has grown by eight per cent over the
preceding year’s budget allocation, the growth rate amounts to 11 per cent
over the revised allocation for 2014-15.
 This means that the original budget allocation of 2014-15 has been
revised downward, to the extent of Rs. 6,630 crore, or three per cent of
the total. The downward revision was on account of the reduction in capital
expenditure by Rs. 12,623 crore (13 per cent)
Revenue
Expenditure
(Rs. in Crore)
Capital
Expenditure (Rs.
in Crore)
Total (Rs. in
Crore)
2014-15 (BE) 134412.1 94588.0 229000.0
2014-15 (RE) 140404.8 81965.2 222370.0
2015-16 (BE) 152139.0 94588.0 246727.0

5. Share of Defence Services in
Defence Budget 2015-16
 Like in the past, the Army
continues to be biggest
stakeholder in the defence
budget. With an approximate
allocation of Rs. 1,30,874 crore,
it accounts for 53 per cent of the
total defence budget in 2015-16.
 It is to be noted, however, that
the Army is the most revenue-
intensive service. In 2015-16, 80
per cent of its budget has been
earmarked for revenue
expenditure. The corresponding
figures for the Navy and Air
force are 38 and 41 per cent,
respectively

6. Comparative Statistics of Defence
Budget: 2014-15 and 2015-16
2014-15 2015-16
Defence Budget (Rs. in Crore) 229000.0 246727.0
Growth of Defence Budget (%) 12.4 7.74
Revenue Expenditure (Rs. in Crore) 134412.05 152139.0
Growth of Revenue Expenditure (%) 14.9 13.2
Share of Revenue Expenditure in Defence Budget (%) 58.7 61.7
Capital Expenditure (Rs. in Crore) 94587.95 94588.0
Growth of Capital Expenditure (%) 9.0 0.0
Share of Capital Expenditure in Defence Budget (%) 41.3 38.3
Capital Acquisition (Rs. in Crore) 75148.03 77704*
Growth of Capital Acquisition (%) 2.3 3.4*
Share of Defence Budget in GDP (%) 1.81 1.75
Share of Defence Budget in Central Government
Expenditure (%) 12.8 13.9

7. Trends in Defence Expenditure in India.
 Defence expenditure (both Revenue & Capital)
forms a part of the Non-Plan expenditure. While
in 2000-01 it used be about 20.5 per cent
(Revenue 15.33 & Capital 5.1) of the Non-plan
expenditure, it has come down to about 18.5 per
cent (Revenue 11.18 & Capital 7.45).
 The Defence expenditure as a percentage of total
central Government expenditure (CGE) been
declining steadily for more than three decades
from about 22 to 25 per cent in the early 1970s to
the historically lowest level of 12.47 per cent
during the current year.

8. Trends in Defence Expenditure in
India
 The ration of Defence expenditure to GDP stands
at 1.75 per cent which is the lowest since 1962-
63 when it stood at 2.32 per cent.The ratio has
continued to decline over the last 30 years.
 Impact Of 14th Finance Commission on the
Future of Allocation of Defence Services-
Defence has to compete with other sectors to
maintain its share in what has now become a
smaller central pie.