The shortfall in defence budget could be met by issuing bonds

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The estimation made by the Defence Ministry reveals that in the next 5 to 7 years, contracts worth 4 trillion rupees will be given to the domestic industry.

The defence budget, which was shrinking over the years, will be supported by issuing bonds to plug any shortfalls. According to an official of the Defence Ministry, to ensure the availability of funds for ongoing schemes, the capital budget should be made non-lapsable.

The budget cuts and the marginal increase in the capital budget induce uncertainties since the defence budget is a limiting factor.

The revenue of the government is under severe stress in the current situation. Hence, it will be impossible to increase the budget.

The availability of funds for ongoing schemes could be ensured only by making the capital budget non-lapsable.

The government to raise additional funds could consider floating National Defence Bonds for augmenting resources. According to the Defence Secretary in 2015-17 Mr. G. Mohan Kumar, a firm foothold in the hi-tech areas is required to achieve self-reliance. He also spoke about the announcement of the Defence Ministry`s recent announcement of the procurement of 101 weapons and platforms from domestic companies under the Atmanirbhar Bharat program.

According to him, self-reliance through an adaption of a multi prolonged strategy was required a long time ago. The critical requirements of technology and ecosystem are needed. Neglection of the private sector was a fundamental mistake.

For ensuring the return of the country into a high growth path, a slew of reforms were introduced by the Central Government in may which included increasing the Foreign Direct Investment cap in the defence sector. The plan also included buying more weapons and platforms made domestically to boost manufacturing.

The defence ministry estimates that contracts worth 4 trillion rupees will be handed over to domestic manufacturers in the next five to seven years. A list of 101 systems was outlined by the ministry earlier this month which included advanced hardware such as submarines which would not be imported.

The ministry also divided the capital procurement budget for 2020-21 between domestic and foreign capital procurement routes. A separate budget head with about 52,000 crore rupees was created for procurement from domestic firms this year. However, a shrinking defence budget is a major cause for concern. The gap between the resource requirement and allocation is increased to 25% in 2019-20.