Tuesday, February 5, 2013

AERO INDIA LIVE!India’s Deficit Could Put New Squeeze On Defense Budget


Dassault has brought its Rafale fighter to the Aero India show but the company is still working hard to resolve complex offset arrangements that underpin last year's Indian government decision to select the jet as the country's new medium multi-role combat aircraft. [Photo: Rakesh Mangaraj, Indian MoD]
February 4, 2013, 10:55 AM
Defense contractors gathering for this week’s Aero India show in Bangalore will be coming to terms with the realization that military procurement plans could well be diminished for next year’s fiscal budget, which begins in April 2013. Further depreciation of the rupee on currency markets and a worsening public deficit have forced the Indian government to further reduce spending, with $1.8 billion having been stripped from the current fiscal year’s defense budget and procurement plans scaled back. There now seems little prospect of next year’s defense budget benefitting from anything like the more than 17 percent hike enjoyed by the 2012/13 budget, which runs through the end of March. This increase had resulted in planned total military spending of $38.6 billion, but due to devaluation of the rupee this total dropped to $35.6 billion. With elections due in 2014 Indian government politicians are likely to protect spending on social programs at the expense of other areas of expenditure.
Among the outcomes from this budgetary down-sizing are that it now seems unlikely that the anticipated contract to acquire 197 new light utility helicopters will be signed this financial year. What’s more, some industry and political sources are now privately expressing doubts that the monumental deal for 126 new medium multi-role combat aircraft can be sealed before the end of the current fiscal year. Selected supplier Dassault Aviation appears to be still struggling to firm up the various offset programs that should see its Rafale fighter enter service with the Indian military.
As things stand, India’s new defense spending proposals for 2013/14 are due to be announced in the last week of February.
“We look forward to complete modernization of the Indian Air Force by 2022,” said Air Chief Marshall NAK Browne during a visit to Phalodi Air Force Station in western India to induct the fifth helicopter unit and its upgraded Mil MI-17 V5 aircraft. India has 71 of the Russian rotorcraft on order.

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