By VIVEK RAGHUVANSHI
NEW DELHI — Despite the new administration’s plans to hike defense spending by 20 percent, funding will rise by only 2.3 percent above proposals announced by the outgoing government due to India’s sluggish economy.
In addition, the government is boosting foreign direct investment (FDI) from 26 percent to 49 percent. Yet analysts say that since foreign investors lose out on the control that a 51 percent stake provides, the new FDI limit still won’t be lucrative for the overseas firms.
Arun Jaitley, who is dual-hatted as defense minister and finance minister, on July 10 proposed to Parliament a $38.16 billion defense budget for fiscal 2014-15. The outgoing administration had proposed a budget of $37.3 billion. The new proposal is 12.1 percent higher than the fiscal 2013-14 budget.
Under the Capital Head, used to buy weapons and equipment, the minister has allocated $15.76 billion compared to $14.93 billion proposed by the previous government, a jump of 5.6 percent.
However, the bulk of the increase — $1.5 billion — is for research and development, leaving almost no additional money for weapons and equipment, a Defence Ministry source added. The research-and-development budget is 55.6 percent higher than the former government proposed.
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