Article Posted on : - Mar 06, 2016

BEIJING (PTI): China on Saturday increased its defence spending by 7.6 per cent to US$ 146 billion, making it almost four times more than India's defence budget despite being the Communist giant's lowest hike in six years.

Amid raging disputes in the South China Sea and deepening tensions with the US, the government, in a budget report presented to the national legislature annual session in Beijing, said it plans to raise the 2016 defence budget by 7.6 per cent to 954 billion yuan (about US$ 146 billion).

The single digit increase is the lowest in six years.

Last year, China increased the defence budget by 10.1 per cent to 886.9 billion yuan, which in dollar terms amounted to US$ 145 billion with prevailing exchange rate.

The Chinese currency has depreciated in the past few months after last year's nearly four per cent devaluation. As a result, this year's budget in dollar terms amounted less despite a 67.1 billion yuan increase.

China is the world's second largest economy and also the second largest defence spender. The US is the world's largest economy and the largest defence spender. The United States' proposed defence budget this year stood at US$ 534 billion.

This year's new increase will do little to close that gap, the state-run Xinhua news agency reported.

China's military expenditure had seen a five-year run of double-digit increases between 2011 and 2015.

The budget report did not offer further breakdown of the figure nor explained the rationale behind the abated growth, although some officials and military experts have pointed to China's economic slowdown, the report said.

The slowdown remained a dominant theme as Chinese Premier Li Keqiang, who presented a work report to this year's inaugural session of the National People's Congress (NPC), on Saturday lowered this year's GDP target to 6.5 per cent saying that the economy was facing headwinds.

The 2.3 million strong People's Liberation Army, (PLA), the largest in the world is also poised to cut three lakh troops. The cut, announced by Chinese President Xi Jinping in September last year, might have also helped drive down the defence budget growth figure.

While China weighed its military spending, comparing itself with the US, from India's point of view the gap with its largest neighbour amounted to nearly four-fold.

This year's India's defence budget presented by Finance Minister Arun Jaitley proposes a 9.7 per cent increase amounting to Rs. 2.58 lakh crore. This in dollar terms works out to about US$ 40 billion. It virtually remained the same at last year's levels due to depreciation of the rupee.

Commenting on the single digit increase of the defence budget, the state run Global Times said, "For many Chinese, the first response was a bit of disappointment. But we believe the decision has its reasons. The Chinese economy has been under grave downward pressure."