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.