NEW DELHI: India hiked its defence spending by only five per cent on Thursday for the next financial year, far below previous increases with the military one of the apparent losers in the 2013/2014 budget.

Finance Minister P Chidambaram raised defence spending to 2.03 trillion Indian rupees ($37.45 billion) for the fiscal year starting April 1, up 5.2 per cent from 2012-13 when the budget stood at 1.93 trillion Indian rupees.

In 2012-13, the increase had been 17 per cent and the year before that spending was bumped up by 12 per cent to fund a modernisation programme that has turned India into the world's biggest arms importer.

Overall budget spending for next year was increased by 16 per cent, with funds focused on rural development, health and education as well as infrastructure ahead of national elections in 2014.

“I assure the house that (defence spending) constraints will not come in the way of providing any additional requirement for the security of the nation,” Chidambaram told parliament.

The minister earmarked $16 billion as “capital expenditure” – meaning spending on hardware.

Domestic security experts warned India’s annualised inflation rate of at least 6.0 per cent meant the million-plus military gained little from the modest increase.

“The condition of India's defence services will remain the same and the step will slow down the modernisation process of the military,” said Afsir Karim, a retired general, told AFP.

India hiked its military spending by a huge 34 per cent in 2009-2010 over the previous year after the 2008 attacks in Mumbai left 166 people dead and revealed gaping holes in the country’s security setup.

Mrinal Suman, who heads the military unit of Confederation of Indian Industries national trade lobby, highlighted how the defence ministry often struggled to spend the money allocated to it.

“Budgetary allocation is not really our concern because funds can be made available when needed, but the defence ministry must spend the money given to it,” said Suman, one of India's top procurement specialists.

He said a string of scandals involving defence contracts – most recently involving AgustaWestland helicopters bought from Italy – had slowed arms purchases because policy-makers were reluctant to take risks on new ventures.

India’s former chief V.K. Singh in a letter to Premier Manmohan Singh that was leaked to the press warned last March that the condition of the military's combat units was “alarming” because of equipment deficiencies.

India is negotiating a series of huge procurement contracts, including for 126 French Rafale fighter jets, 400 combat helicopters, as well as artillery, drones and electronic warfare systems.