The defence expenditure will be increased by about 44 per cent in the next two years, owing to modernization requirements. According to medium-term expenditure projections under Fiscal Responsibility and Budget Managment Act, Defence Services expenditure has increased by 13.52 per cent overall in 2012-13 of budget estimated over previous year's revised estimates. The revenue component, which has a large portion of salary of defence personnel has also grew up by seven per cent and the capital component by 19.6 per cent.

For the next two years, it has been assumed that revenue component will increase by seven per cent per annum and capital component by 13 to 14 per cent. Thus, based on these projections, Defence Capital expenditure, which was 38.7 per cent of total allocations for Defence Services in revised estimate for 2011-12, will go up to 44 per cent in 2014-15.

This is required keeping in view the defence Moderationization requirements. Medium Term Expenditure Framework projected that the Defence will need 1,21,797 crore rupees in 2013-14 and 130,322 crore rupees in 2014-15.