NEW DELHI (India) – India increased the amount of money it plans to spend on its military next fiscal year by 11% to nearly 2.47 trillion rupees ($40 billion) as the South Asian nation plans to continue to invest in expanding and modernizing its armed forces.
In the year starting April 1, India will boost military spending from 2.22 trillion rupees this year, said Finance Minister Arun Jaitley in his federal budget speech Saturday. He said India will be trying to buy more of its arms domestically.
“We have been overdependent on imports, with its attendant unwelcome spin offs,” Mr. Jaitley said in his budget speech. “We are thus pursuing the ’Make in India policy’ to achieve greater self-sufficiency in the area of defense equipment.”
India has become the world’s biggest arms importer in recent years as it attempts to build up its military to deal with tensions with Pakistan and the growing military strength of China.
India plans to cut its outlay toward new aircraft and engines for the Indian Air Force to 189 billion rupees for the coming fiscal year from 215 billion rupees this year. Mr. Jaitley allocated about 160 billion rupees for the navy to upgrade its fleet, up from a revised 94 billion rupees this year.
“I thought it was more prudent to make people save more rather than make this a consumption society,” Jaitley reportedly said in an interview following his budget speech. However, he proposed a scheme to monetize about 20,000 tons of privately held gold by introducing a gold deposit account. Jaitley also said that the government would come up with sovereign bonds to discourage the purchase of physical gold. This might help reduce gold imports to India, which is currently the world’s biggest gold importer.
Jaitley allocated an additional $11 billion toward spending on infrastructure and also sought to rein in the country’s fiscal deficit to 3 percent of its gross domestic product over the next three years.
“India is about to take off,” the country’s finance minister Arun Jaitley said, in his budget speech to parliament. “The world is predicting that this is India’s chance to fly.”
Presenting the first full budget of the Narendra Modi-led government, following a landslide election victory in May last year, Jaitley said that the government would provide a universal social security safety net and several new pension schemes to assist the poorest of its citizens.
Jaitley sought to unburden the corporate sector by reducing corporate tax to 25 percent from 30 percent. He abolished the “wealth tax,” and replaced it with a 2 percent surcharge on the incomes of the “super rich”, who earn more than $150,000 a year. The money obtained from this additional tax would go toward infrastructure funding.
India’s Prime Minister Narendra Modi has made military modernization one of his top priorities since his government came to power in May. Soon after taking charge, Mr. Modi’s government started allowing foreign firms to hold up to 49% stakes in defense ventures. Previously, foreign firms were only allowed to own up to 26% stakes in military joint ventures.
Prime Minister Modi tweeted that his government’s budget has a “distinct focus on farmers, youth, poor, neo-middle class” and the common man. “[The] budget is investment friendly and removes all doubts on tax issues. It assures investors that we have a stable, fair and predictable tax system,” Modi said in a subsequent tweet.
Although the budget incentivized savings, it did not provide any direct tax relief to the middle or low income classes.