NEW DELHI, Feb 28: Finance Minister Palaniappan Chidambaram on Tuesday unveiled India’s budget for the year to March 2007 with a total federal government outlay of $126.8 billion or Rs5639.91 billion, of which $20 billion or Rs890 billion are earmarked for defence, a 7.2 per cent increase over the previous year’s budgeted military expenditure.

The increase puts defence spending at 2.4 pct of GDP — below the expectations of military-planners, some of whom have been campaigning for sustained spending of more than three pct of GDP to speed up the ongoing revamp process.

Of the Rs890 billion defence budget Rs374.6 billion –- or 42 per cent of the total outlay — is earmarked for capital expenditure or the purchase of arms and equipment.

“In view of the enhanced expenditure on modernisation of defence forces, I propose to increase the allocation for defence from Rs830 bn to Rs890 bn in 2006-07, and this will include Rs374 bn for capital expenditure,” Mr Chidmabaram said in his budget speech.

Of the defence outlay of Rs830 billion for the outgoing fiscal, a total of Rs817 billion was spent, with only Rs13 billion left unspent by the defence ministry. This marked a turnaround from earlier years, when the ministry surrendered millions of rupees earmarked for purchasing modern arms. India, which is one of Asia’s biggest arms buyers, is looking for 126 new military jets.

As is the norm, the 1.2 million-strong Indian Army will get a major share of the total outlay at Rs322.98 bn followed by the air force with Rs98.58 bn and the navy with Rs67.13 bn.

The outlay for the 39 state-run ordnance factories is Rs3.36 bn while for the Defence Research and Development Organisation was Rs30.08 billion.

Much of the capital outlay for defence was expected to be cornered by big ticket deals concluded by India in recent years, including the refurbished Russian aircraft carrier Admiral Gorshkov, the 66 Hawk jet trainers bought from Britain and six Scorpene submarines from France. Payments for such large deals are spread over several years.

In the overall budget estimates for 2006-07, the total expenditure is estimated at Rs5639.91 bn. Mr Chidambaram said he estimated total revenue receipts of the Central Government at Rs4034.65 bn and the revenue expenditure at Rs4881.92 bn.

Consequently, the new revenue deficit is estimated at Rs847.27 bn which is 2.1 per cent of the GDP. The fiscal deficit is estimated at Rs1486.86 bn, which is 3.8 per cent of the GDP.

“I believe that I have redeemed my promise that the process of fiscal correction will be resumed in 2006-07,” Mr Chidambaram said.

While Mr Chidambaram delivered what he called a “common man’s budget” setting an ambitious annual growth target of 10 per cent, opposition parties and his own leftist allies slammed the projections as pro-rich and anti-poor.

Two out of three Indians still live on less than a dollar a day. Mr Chidamabaram said his budget focussed on agriculture, healthcare and education for the masses. Education spending is to rise by 31.5 per cent and health spending by 22 per cent.

“This budget has deceived the common man. The tax system is regressive. Heavy concessions have been granted to the corporate sector and spending on education and healthcare has not been increased to the expected levels,” Communist Party of India leader Gurudas Dasgupta told reporters.

Slamming the budget, Bharatiya Janata Party’s Vijay Kumar Malhotra said the budget would further increase prices and was against development and growth.