India's Budget Puts Priority on Defense

The Indian government just released their interim budget and defense spending received a hefty increase. Like other countries India is struggling with the world economic downturn that is affecting the banks and overall commercial sector. Sify.com reports that defense spending has a proposed thirty-five percent increase for this year. The government will also continue to invest in rural infrastructure improvements. India recently has awarded two large contracts to U.S. companies and is looking at two major aircraft awards -- a new fighter and a new medium helicopter -- that a variety of U.S. and European companies have bid on. Even though awards to foreign companies are taking money out of the country India requires a thirty percent offset for these contracts. So thirty percent of the value of these awards will flow back into India either in purchase of parts or services for the aircraft or in contracts by the prime to Indian companies. Some foreign companies do not care for the offset requirements and that has deterred them from bidding on work. India can be expected to continue high levels of defense spending in the future as they improve the technical quality of their forces and invest in the indigenous defense industry.