Indian Budget Casts Doubt on Rafale Deal

India will spend US $40.4 billion (calculated on one USD equivalent to 61 Indian Rupees) on defense in the next financial year April 1 2015-March 31 2016 financial year, according to the Feb. 28 proposal to Parliament.

Finance Minister Arun Jaitley gave no additional funds in the "Capital Account Head" of the budget proposals, which is earmarked to buy fresh weapons. The budget included the same amount as last year: giving only $15.5 billion which is same amount allocated last year.

"With the stagnation in capital expenditure, I believe there is very little left in the budget to cater to new contracts," said Laxman Behera (cq), research fellow at the Delhi-based think tank, Institute for Defence Studies and Analyses think tank in New Delhi.

Amit Cowshish (cq), retired Defence Ministry of Defence (MoD) additional defense finance adviser and defense analyst, said: "It is unlikely that the allocation [under Capital Account] would cater for only committed liabilities."

Said an An Indian Air Force officer: (IAF) said, "With no fresh money it is unlikely if we can contract the $12 billion Rafale fighter deal with Dassault Aviation of France, nor buy additional aircraft in the next financial year."

At best, a the $2.5 billion deal finalized two years ago to for the purchase of Aattack and heavy lift helicopters from Boeing of U.S. could be inked as the US company has threatened to hike the price if the deal is delayed, the official added.

"The budget allocation may not be sufficient even for contracted projects as they are carry over from the 2014-15 budget on capital account," said says Rahul Bhonsle (cq), retired Indian Army Bbrigadier general and defense analyst.

The Bharatiya Janata Party (BJP) in its election campaign had promised during that election to modernize defense and meet that defense modernization of the Indian defense forces and also meet the weapons requirements, said defense analyst says Nitin Mehta (cq), defense analyst. "The first full budget of the new government announced Feb.ruary 28 is a let down on expectations," he said. adds Mehta.

"There are serious concerns over government's commitment to fully budget India's defense and security needs despite statements by the Prime Minister Narendra Modi on modernization of the armed forces," he said. says Bhonsle.

Said Mehta: "Sadly, the budget reflects continuation of the policies of the previous government. For structural changes there has to be greater synergy between the Ministry of Defence and Finance," says Mehta."

This is what Behera said security needs to have support from both the government and lawmakers. there are differences between the new and previous government. had to say about how the new government is different from the outgoing in terms of allocating on defense spending.

"I believe the Indian security needs have bipartisan support of both BJP or Congress-led government. However, such security needs are to be satisfied within the overall resource availability," he said. "The defense budget 2015-16 has been subject to resource crunch arising out of slowdown in revenue mobilization and greater devolution of resources to the state government."

However, Cowshish said says defense still constitutes around 13.88 percent of India's total budget and as such is a major chunk of allocation.

"Defense budget is the second largest single item of expenditure in the non-plan segment of the union budget. One has to keep these facts in view while forming an opinion on whether the allocation is in sync with the promise or not," says Cowshish said.

With such a tight defense budget, it remains to be seen which of one will have to wait to see how many of the ongoing programs will be are inked. Nearly $20 billion worth fresh weapons purchase projects are in the mix, including:which are awaiting contract

• $12 billion to purchase medium multirole fighter jetsCombat Aircraft program, with Dassault as the preferred bidder