NEW DELHI: The Eleventh Plan size at Rs. 6.5 lakh crore for the Defence Ministry is about 2.57 per cent of the Gross Domestic Product (GDP) assuming a GDP growth rate of eight per cent between fiscal 2007 and 2012.

This falls short of the armed forces' demand for 3 per cent allocation of the GDP during the Plan. A presentation by the three services last month had projected a requirement of Rs. 7.4 lakh crores or Rs. 1.48 lakh crores annually.

The allocation during the Tenth Plan (2002-2007) was estimated at 2.33 to 2.34 per cent of the GDP and stood in the region of Rs. 3.64 lakh crore. There was a gap of Rs. 54,100 crore between the indicative figure of Rs. 4.18 lakh crore projected by the Defence Ministry and the allocation made by the Government in defence budgets.

A Ministry official said the focus of the next Five Year Plan would be to bring the pattern of defence budgeting in line with international trends. India had traditionally spent more on the revenue account (allocation for pay, allowances, stores and upkeep of equipment) and less on the capital account (purchase of defence equipment).

The new Plan would try to change the revenue-capital spending ratio from 40:60 to 50:50. The final goal would be to emulate the developed countries, which spend 35 per cent of their annual budgets on revenue and the remaining for inducting new weapon systems.

Going by the past, however, the Government was unlikely to approve the projected amount due to the obligations of reducing the Centre's debt under the Fiscal Responsibility and Budget Management Act and interest and subsidy burdens. The entire spending on defence was from borrowed money.

The growth in spending projected by the Defence Ministry during the Plan would be 9 to 9.5 per cent in real terms. The average growth in defence budget over the last seven years had been about 9.5 per cent. The share of capital expenditure had grown from 25 per cent in 2000-01 to 42 per cent during the current fiscal, underscoring the importance on rapid modernisation and capability upgrade of the armed forces. Defence Minister Pranab Mukherjee had often stressed on the need to increase this proportion to 50 per cent.

``That is the main emphasis of the next Plan," the official said.

The formulation of the Tenth Plan was a fiasco because the Defence and Finance Ministries were unable to agree on the final figure.

As a result, India could only make partial progress in achieving the Plan's underlying theme — to make up for deficiencies and voids, inducting suitable replacements for obsolete equipment and modernising existing assets.

The Indian Air Force would face the brunt of the failure of the Government to finalise and make suitable allocation for the Plan. With less than a year for the next Five Year Plan to begin, Mr. Mukherjee held a six-hour meeting on June 30 to integrate the plans sent by the three services.

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