NEW DELHI: Indian Finance Minister Arun Jaitley said on Thursday he was keeping an eye peeled for the impact of the Iraq crisis on the economy, and announced just an additional Rs50 billion for the Defence Budge, taking the amount allocated to the Indian Defence to Rs2.29 trillion. In the interim budget presented by the Manmohan Singh government, the amount was Rs2.24 trillion.

Mr Jaitley said he was conscious of the fact that Iraq crisis was leaving behind an impact on oil prices and that the situation in the Middle East continues to be volatile.

“I propose to increase the capital outlay for the defence by Rs5,000 crore over the amount provided in the interim budget. This includes a sum of Rs1,000 crore for accelerating the development of railway system in border areas,” Mr Jaitley said, adding that acquisition processes would be streamlined for making it speedy and more efficient.

He also proposed setting up of a war memorial at Prince’s Park near the India Gate in Delhi and a national police memorial and set aside Rs1 billion and Rs500 million for these, respectively.

He announced assistance in Maoist areas as well as for socio-economic development of villages along the borders.

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On increasing FDI limit to 49 per cent through the Foreign Investment Promotion Board (FIPB) route in the defence sector with full Indian management and control, Mr Jaitley said: “India today is a largest buyer of defence equipment in the world and domestic manufacturing capabilities in this area are still in a nascent stage.

“We are buying substantial part of our defence requirements directly from foreign players, companies controlled by foreign governments and foreign private parties are supplying our defence requirements to us and at a considerable outflow of foreign exchange,” he said.

“Currently, we permit 26pc FDI in defence manufacturing. The composite cap of foreign exchange is being raised to 49pc with full Indian management and control through the FIPB route,” Mr Jaitley said. The last government had allowed FDI limit to 26pc through FIPB approval route and allowed FDI up to 100pc through the Cabinet Committee on Security-approval route.

For providing resources to public and private sector companies, including small and medium enterprises, to support research and development in developing defence systems, Mr Jaitley proposed a Rs1 billion Technology Development Fund to support the objective. He said a separate fund in this regard was announced in 2011 by the previous government “but beyond the announcement, no action was taken”.

Defence forces are working towards modernising their assets and look towards finalising major deals such as the 126 multi-role combat aircraft contract, which is expected to be worth over Rs600 billion. The other major acquisitions expected to be finalised in next few weeks include the deals for 22 Apache combat choppers, 15 Chinook heavy-lift helicopters and six mid-air refuelling aircraft.

The ministry has been seeking additional funds of Rs 400 billion since last few years, reports said.

Mr Jaitley took a break in the middle of his budget presentation because of a severe back pain and read out much of his speech sitting, an unusual departure from tradition.

Published in Dawn, July 11th, 2014