Expressing determination to eliminate "all delays" in modernisation of the armed forces, the government on Thursday hiked the defence budget by a whopping 27 per cent to Rs 77,000 crore (Rs 770 billion) as against the revised estimates of Rs 63,000 crore (Rs 630 billion), but did away with the National Democratic Alliance regime's proposal to have a three year non-lapseable revolving fund.

The government more than doubled the allocation for capital outlay to Rs 33,482 crore (Rs 334.82 billion) from last year's revised estimates of Rs 16,906 crore (Rs 169.06 billion) with Prime Minister Manmohan Singh saying that defence expenditure had been neglected over the past three to four years.

Increasing the defence outlay in the Union Budget 2004-05, Finance Minister P Chidambaram said it had become "necessary" to make a higher allocation this year to keep up the trend of acquisition of state-of-the-art weapons.

With the doubling of capital outlay, it appears the government would go ahead with pending proposals to acquire French killer class Scorpene submarines, 125 multi-purpose fighters for the Air Force to replace ageing Mig-21s and with about Rs 4,000 crore (Rs 40 billion) project to increase the firepower of the infantry.

Despite a hefty hike, India's defence expenditure still forms only 2.5 per cent of the GDP, much lower than China which spends 6 per cent and Pakistan 5.5 per cent of their GDP on defence.