Jay Menon and Leithen Francis New Delhi

India is trimming defense spending for its current fiscal year, which ends March 31, but Defense Minister A.K. Antony says spending on operational preparedness will not suffer.

And to underscore the assertion—and possibly allay the fears of Indian officials and Western contractors desperate for India's business—the country's air force chief insists that India finally will sign a long-awaited contract for 126 Dassault Rafale fighters by the middle of this year.

“The government is passing through a difficult phase,” the defense chief says. “The recession is affecting us. There will be a cut in the capital and revenue budget. However, we will not cut the expenditure on operational preparedness.”

For the current fiscal year, the Indian government has cut defense spending by about 5% from the allocated 1.93 trillion rupees ($38.6 billion), mainly due to the ongoing economic downturn.

Of the allocated 1.93 trillion rupees, 1.13 trillion have gone to revenue expenditures including salaries and pensions, and 795.79 billion were earmarked for modernizing the armed forces by acquiring new assets.

Several key acquisition plans are expected to be pushed into the next fiscal year.

The decision to prune capital acquisitions by 100 billion rupees comes at a time when India has announced several large defense acquisition projects, including the more than $20 billion effort to acquire 126 Dassault Rafales under the widely watched Medium Multi-Role Combat Aircraft (MMRCA) program, and a program to buy Apache and Chinook helicopters from Boeing.