Currently, the most compelling requirements are funding for the 126 Rafale aircraft, Chinook and Apache helicopters for IAF, a Mountain Strike Corps, air defence artillery and field guns for Indian Army, and helicopters for the Indian Navy

On March 5, 2013, China announced a double-digit hike in defence expenditure to $119 billion ( Rs. 6,54,500 crore), a 10.7 per cent rise vis-à-vis 11.2 per cent increase last year. It was 5.4 per cent of China’s total national outlay of $2.2 trillion ( Rs. 12,100,000 crore) which itself has seen a 10 per cent increase over last year. It is the first budget for the new President Xi Jinping. For some time now, China has proclaimed that threat to its security has been more internal than external. Yet the increase in defence budget is higher than that for homeland security, the latter having gone up by only by 8.7 per cent. It is a well-known fact that there is a hidden element of nearly 60 per cent in China’s defence budget which analysts peg at $180 billion ( Rs. 9,90,000 crore).

Does this send signals to the US and the Asian neighbours: India, Japan, Taiwan and Vietnam? India and China have serious boundary issues, which are part of the legacy of the colonial past that led to a war five decades ago. Japan and China have historic animosity and serious disputes over islands in the East China Sea. The Philippines and Vietnam have questioned Beijing’s claim to a huge oil-bearing area in the South China Sea.

Analysis of the China’s budget in recent years indicates that defence outlay has been around two per cent of the GDP as against 2.5 per cent in India. However, today, India’s defence outlay stands at 1.79 per cent of GDP. China’s defence spending is 3.13 times that of India’s. In 2006, it was the same as what India will spend in the coming year. Though USA currently spends six times more than China on defence, trends indicate that China will overtake the US by around 2033.

In June 2012, Islamabad hiked the defence budget by nearly 10 per cent to $5.82 billion ( Rs. 32010 crore) of which 61 per cent is for the Army, 26 per cent for the Air Force and 12.3 per cent for the Navy. The Pakistani defence budget usually excludes fresh procurements. Separate funding for the major Air Force projects like FC-20 and J-10 multi-role combat aircraft are pending owing to the poor state of the economy. Military spending, which was 25 per cent of the national budget in 2006, has reduced to 19.4 per cent this year and is around four per cent of the GDP. Pakistan also diverts significant part of the funds received from the US for the war in Afghanistan, to the military. Also, some Arab countries have supported Pakistan financially for years. However, Pakistan has had her years of trouble too such as internal strife, terrorism, floods of 2010, fall-out of global economic meltdown, perpetual tension with India and war on the western border.

In the Indian budget for 2013-14, the defence outlay is $38 billion ( Rs. 2,09,000 crore), 12 per cent of national outlay of $314 billion ( Rs. 1,727,000 crore and a hike of 5.18 per cent over last year’s allocation of Rs. 1,93,000 crore, and 14 per cent hike over last year’s revised estimate (RE) of Rs. 1,78,503 crore. There is 24 per cent increase over RE for capital expenditure. With inflation around seven per cent and the rupee still weak compared to the US dollar, the growth in defence outlay some analysts feel, is actually negative. India has surpassed China and in the last five years has been the largest importer of arms in the world. This is primarily because the indigenous industry has not been able to meet the nation’s requirement of defence hardware.