March 04, 2013: The nominal hike of just five per cent in the Indian defence budget to Rs. 2,03,672 crore brings the country's defence budget to its lowest percentage of GDP in the last three decades, and fails to even account for inflation in real terms. While the MoD and Minister A.K. Antony were prepared for the big finger on the pause button, Finance Minister P. Chidambaram has made an assurance that constraints will not come in the way of "national security" requirements. Now what is, will be open to prioritisation and interpretation at multiple levels, but it appears reasonable to expect that the overall economic gloom impacting the defence budget could mean delays or deferments in modernisation. While it is well known that heads under the defence budget are not sacrosanct — and that funds can be shuffled between heads as per the discretion of planners in the MoD — there is palpable sense of anxiety over whether the funds made available to the MoD for modernisation this year — Rs 86,742 crore — will be sufficient to pull along ongoing efforts, and fund prospective new ones. It so happens that most current procurement efforts are for high value equipment.

The MMRCA deal, which is expected to be concluded by the end of this year, will require pre-payments for the flyaway aircraft to be supplied by Dassault Aviation, followed by regularised payments that will total up to $20-billion, making it India's largest single defence deal in hiStory. The Indian Army is in the final stages of evaluating contenders for $6-billion deal for very short-range air defence systems (VSHORADS). The Indian Navy, after years of delay, is finally ready to push out a formal requirement for six conventional attack submarines under the P75I programme. There is no suggestion yet that any of these programmes will be directly delayed or impacted, though a budget slash is almost always a cause for concern for acquisition managers and the armed forces, since the squeeze will involve inter-service prioritisation as far as procurements are concerned. Other big-ticket programmes currently in various stages, include the procurement of 16 multi-role helicopters for the Navy (to be followed by 75 more under the NMRH programme), the medium-range maritime reconnaissance aircraft (MRMR) for the Navy, 56 naval utility helicopters (NUH), 56 replacement aircraft for the IAF's old HS-748 Avro transports and several others.