The contents of the general, as well as, the defence budget of the Government of India have normally been widely discussed and debated. However, the focus mostly has been on the magnitude of the budget rather than the system of budgeting. Yet it is the system that needs to be the focus of discussions and requires reforms. Over a period of time, the budget documents had become quite static in terms of structure, content and communication of results.

Defence planning is essentially a subset of overall national level planning in the political, economic and social spheres and has to be evolved in the context of global and proximate factors affecting the nation. . It has also to take into account the philosophy and ethos animating the national psyche; in other words the historical and cultural forces which have shaped the collective memory and outlook of the people over the centuries.

Defence can seldom ignore the standard economic problem—the need to make critical often hard resource choices. Yet the output of defence studies focuses almost entirely on professional and strategic issues, and little on finance or economics. There is a presumption in most countries that the needs of defence must be met, and often they are met without

World over, differences exist about the impact of military expenditure. While development economists consider excessive military expenditure as wastage, many defence economists have a different view. With the defence versus1 development debate unending, China makes a unique contribution. While China’s defence expenditure is not well known, the hinese experience shows that investments in development do provide an expanded economic base subsequently, which will take care of defence needs.

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.