In India, the defence budgeting system is incremental and input-based. Yearly allocations of funds are made without reference to the defence plans. In effect, the budget does not get linked to any established goals or outputs. Resource planning beyond a one-year period is not carried out. Some have even called it an archaic system. The five-year defence plans have lost their utility for resource planning. This article brings out the shortcomings in the present budgeting system and recommends some options for a goal-oriented budgeting system.

Before and during World War II, India was one of the many territorial commands of the British imperial defence system. When India became independent, the country was totally reliant on Britain for its armaments for the three services. There was some left over equipment of the US armed forces from the World War II period – Dakota aircraft, some Sherman tanks and transport vehicles.

Significant changes have been witnessed in major centres of military production in recent times. Since the end of the Cold War, indicators of military production – expenditure, R&D expenditure, demand and supply of weaponry, and others – have shown fluctuations. Military efforts of States decelerated for nearly a decade, only to rise again since the late 1990s.