India increased its military expenditure for FY2014-15 to Rs 2.29 lakh crore - an increase of 12.5% over the previous financial year. In his maiden budget,
Jaitley allocated Rs 5,000 crore more than the Rs 2.24 lakh crore allocated in the interim budget presented by the UPA government in February. The defence sector was allocated Rs 2,03,672 crore in FY2013-14.
The finance minister raised the FDI cap in the defence sector from 26% to 49% to attract investments from global arms firms.
"There can be no compromise with the defence of our country. I, therefore, propose to allocate an amount of Rs 2,29,000 crore for the current financial year for defence," Jaitley said in his budget speech in the Parliament.
"Modernisation of the armed forces is critical to enable them to play their role effectively in the defence of India's strategic interests. I, therefore, propose to increase the capital outlay for defence by Rs 5,000 crore over the amount provided for in the Interim Budget," he said.
India has been repeatedly expressing concern over China's rapid development of rail and road infrastructure along the disputed border, including those in Arunachal Pradesh.
"Our domestic manufacturing capacities are still at a nascent stage. We are buying substantial part of our defence requirements directly from foreign players. Companies controlled by foreign governments and foreign private sector are supplying our defence requirements to us at a considerable outflow of foreign exchange," said Jaitley.
"Currently we permit 26% FDI in defence manufacturing. The composite cap of foreign exchange is being raised to 49 per cent with full Indian management and control through the FIPB route," he said.