By S.N. Mishra
12 Sep , 2015
Richard Musgrave, an acknowledged authority in public finance, had said that every Finance Minister must grapple with the three issues of Allocation, Distribution and Stabilisation. Arun Jaitley, while flagging the fiscal footprints of consolidation and prudence, seems to have echoed Musgrave’s mantras. Defence expenditure cannot be relegated to cosmetic discussions on its linkage with GDP. A definitive roadmap needs to be etched by the political leadership to ensure that this sector is in sync with national concern for fiscal prudence without compromising needs for modernisation and operational preparedness.
The defence budget for 2014-2015 has raised enormous curiosity regarding the directional change that will be ushered by the new Finance Minister who doubles up as Raksha Mantri. The big news is increase in Foreign Direct Investment (FDI) cap to 49 per cent and the creation of a corpus of Rs 100 crore towards the Defence Technology Fund (DTF). The DTF concept was mooted in the Defence Production Policy 2011. Its activation is welcome as it would hopefully provide funds to universities, the private sector and institutions of repute such as the Indian Institute Science to pursue niche technology. The enhancement of the FDI ceiling with full management control has been bit of a dampener because it has to be routed through Foreign Investment Promotion Board (FIPB) and full management control would remain with India. This will deter global Original Equipment Manufacturers (OEMs) from making investments in key technologies as they would not have majority rights.

