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1. SHRI RAMSWAROOP MEMORIAL UNIVERSITY
SESSION: 2019 -20
SUBJECT :- PUBLIC FINANCE ( BCM4007 )
TOPIC :- DEFENCE SECTOR
MADE BY :
VINODKUMAR YADAV
B.COM ( H )
201810701110008

2. Historical background of defence sector .
The defence industry of india is a strategically important sector in india . with
a strength of over 1.44 million active personnel, it is the world's largest military
force. India has the world's largest volunteer military of over 5.1 million
personnel. The total budget sanctioned for the indian military for the financial
year 2019 is $60.9 billion.
"Defence production policy of 2018" (dprp-2018) has a goal of becoming
among the top 5 global producers of the aerospace and defence
manufacturing with annual export target of us$5 billion by 2025.
Despite having a modest internal defence industry, india is the
largest arms importer in the world, with most of its high-tech, high-value
equipment such as aircraft, ships, submarines, missiles, etc. Coming in
from russia .

3. 12% of worldwide arms exports (by value) reach india. India
domestically produces only 45% to 50% of defence products it
uses, and the rest are imported. india's military–industrial complex
has had little success and only recently private sector was allowed
to enter the defence production. India's defence exports were INR
4,682 crore (US$0.66 billion) in 2017–2018 and INR10,500 crore
(US$1.47 billion) in 2018–2019, of 2018–2019 exports india's 8
defence public sector undertakings (DPSU) and 41 ordnance
factories (OF) contributed INR800 crore (7.6% of total defence
exports).

4. FDI IN DEFENCE SECTOR .
Even though modi government has been trying hard to get FDI in
defence sector by first raising the cap from 26% to 49% through
automatic route and 100% through mod's approval, whereby the
investing foreign entity can have ownership up to 100% in the
defence manufacturing, it has received A dismal response with A
meagre investment of just US$0.08 million (INR 56 lacs) in 2014–15,
US$0.10 million (INR 71 lac) in 2015–16, US$0.01 million (INR 7 lacs) in
2017–18 and US$2.18 million (INR 15 crores) during 2018–19

5. YEAR TOTAL FDI IN DEFENCE
2014 - 15 USD 0.08 million (INR 56 lacs) .
2015 - 16 USD 0.10 million (INR 71 lac) .
2017 - 18 USD 0.01 million (INR 7 lacs).
2018 - 19 USD 2.18 million (INR 15 crores)

6.  In a marginal hike, the defence budget was increased to Rs
3.37 lakh crore for 2020-21 against last year’s Rs 3.18 lakh
crore, belying expectations of a significantly enhanced
allocation to fast-track long-pending military
modernisation.
 Out of total allocation, Rs 1.13 lakh crore has been set aside
for capital outlay to purchase new weapons, aircraft,
warships and other military hardware, according to the
Union Budget presented in Lok Sabha by Finance Minister
Nirmala Sitharaman.

7.  The revenue expenditure which includes expenses on
payment of salaries and maintenance of establishments has
been pegged at Rs 2.09 lakh crore. The revenue
expenditure which includes expenses on payment of
salaries and maintenance of establishments has been
pegged at Rs 2.09 lakh crore.
 The size of defence budget stands at Rs 4.71 lakh crore if a
separate allocation of Rs 1.33 lakh crore set aside for
payment of pensions is taken into account.
 The capital outlay of Rs 1,13,734 crore is an increase of Rs
10,340 crore as against last year's budget estimate of
1,03,394 crore.

8. MOD BUDGET :- DEFENCE , CIVIL , PENSION .
YEAR DEFENCE SERVICE
RS IN (CRORE)
MOD ( CIVIL )
( RS IN CRORE)
PENSION
( RS IN CRORE )
TOTAL
( RS IN CRORE )
2018-19 290802
(72)
10881
(3)
101775
(25)
403457
2019-20 (BE) 305296
(71)
13635(3) 112080
26)
431011
2019-20 (RE) 316296
(70)
14714
(3)
117810
(26)
448820
2020-21 (BE) 323053
(69)
14500
(3)
133825
(28)
471378

9.  Figures in parenthesis represent percentage share in MoD’s total
expenditure. MoD (Civil) includes MoD Secretariat, Border Roads
Organisation, Defence Accounts Department, Coast Guard Organisation,
Defence Estate Organisation, Jammu and Kashmir Light Infantry, Armed
Forces Tribunal, etc. BE and RE represent Budget Estimate and Revised
Estimate, respectively.
 the MoD’s total allocation, revenue expenditure amounts to 75 per cent
and capital expenditure 25 per cent. It is important to note that while
MoD’s revenue segment represents just 13 per cent of the central
governments’ total revenue budget, its capital expenditure amounts to
29 per cent of the total capital outlays of the union budget.

10. Defence Budget 2020-21: Growth over Previous Allocation.REVENUE ( RS IN
CRORE )
CAPITAL
( RS IN CRORE )
TOTAL
( RS IN CRORE )
2019-20 (BE) 201902 103394 305296
2019-20 (RE) 205902 110394 316296
2020-21 (BE) 209319 113734 323053
Increase in 2020-21 (BE) over 2019-20
(BE)
7417 (3.7) 10340 (10.0) 17757 (5.8)
Increase in 2020-21 (BE) over 2019-20
(RE)
3417 (1.7) 3340 (3.0) 6757 (2.1)

11. SHARES OF DEFENCE SERVICES .

12. Revenue and Capital Expenditure of Army, Navy
and Air Force, 2020-21
ARMY NAVY AIR FORCE
Revenue Expenditure (Rs in Crore) 1,46,941 22,935 29,963
Capital Expenditure (Rs in Crore) 32,474 26,688 43,282
Total (Rs in Crore) 1,79,415 49,623 73,245
Revenue Expenditure as % of Total 82 46 41
Capital Expenditure as % of Total 18 54 59

13. MODERNISATION
Modernisation outlays for individual services in respect of budget and
revised estimates of 2019-20 and budget estimate of 2020-21. As can be
seen, all three services have got a hike in their 2020-21 modernisation
budget, with the overall increase being 11 per cent or Rs. 9,227
crore. However, in comparison to the revised budget of 2019-20, the
increase is a mere Rs. 255 crore. The meagre increase vis-à-vis revised
allocation looks grossly under-provisioned in view of the vast shortages
existing in capital procurement.

14. Modernisation Budget of Indian Armed Forces
2019-20 (BE)
( RS IN CRORE )
2019-20 (RE)
( RS IN CRORE )
2020-21 (BE)
( RS IN CRORE )
% Increase in 2020-
21 (BE)
over 2019-20 (BE)
ARMY
22951 23517 13.3
NAVY
25155 15.9
AIR FORCE
41722 39031 7.3
TOTAL 90394 11.3

15. Modernisation Budget of Indian Army
MODERNISATION
HEAD
2019-20 (BE)
(RS IN CRORE )
2019-20 (RE)
( RS IN CRORE )
2020-21 (BE)
( RS IN CRORE )
% Increase in 2020-
21 (BE)
over 2019-20 (BE)
Aircraft & Aero-
Engine
4000 89.1
Heavy & Medium
Vehicles
2128
1466 1589 -25.3
Other Equipment 20209 8.9
Rolling Stock 50 3 100 100
Rashtriya Rifles 95 95 100 5.3
Total 22951 25999 13.3

16. Modernisation Budget of Indian Navy
MODERNISATION
HEAD
2019-20 (BE)
( RS IN CRORE )
2019-20 (RE)
( RS IN CRORE )
2020-21 ( BE)
( RS IN CRORE )
% Increase in
2020-21
(BE) over 2019-20
Aircraft & Aero-
Engine
2400 1150 4640 93.3
Heavy & Medium
Vehicles 45 25 30 -33.3
Other Equipment 3500 3600 3000 -14.3
Joint Staff 929 929 1022 10.0
Naval Fleet 12182 15434 12746 4.6
Naval
Dockyard/Projects 3050 4017 4182 37.1
Total 22106 25155 25620 15.9

17. Modernisation Budget of Indian Air Force
MODERNISATION HEAD
2019-20 (BE)
(RS IN CRORE )
2019-20 (RE)
( RS IN CRORE )
2020-21 (BE)
( RS IN CRORE )
%
Increase
in 2020-
21 (BE)
over
2019-20
(BE)
Aircraft & Aero-Engine 24807 21736 26910 8.5
Heavy & Medium
Vehicles
110 110 120 9.1
Other Equipment 11448 19876 12001 4.8
Total 36365 41722 39031
7.3