India’s Defence Budget Cast In The Old Mould

India’s Defence Budget Cast In The Old Mould

Defence has got INR 2,46,727 crore (USD 40.07 billion), which is roughly 1.73 per cent of India’s Gross Domestic Product (GDP) and 13.88 per cent of the total Central expenditure. If this is compared to 2014-15 budget, defence allocation is up by 9.87 per cent

The period from 2004-14, as far as country’s defence preparedness is concerned, is considered as ‘lost decade’. The armed forces lost the cutting edge as their hardware gradually slid into obsolescence. No appreciable effort, monetary or otherwise was made by the then UPA government to arrest this trend.

India’s defence needs, as more and more military hardware fell into the obsolescence black hole, have accumulated over the years. For instance, Indian Air Force (IAF) has come down to 25 fighter squadron strength from its authorised 45 squadron strength. It is worrisome that by 2024, when MiG 21’s and 27’s are phased out and new aircrafts are not inducted, IAF’s fleet of fighter aircrafts will shrink to mere 11 squadrons. Navy has inducted only one submarine to its fleet, while it has retired five in the last 15 years. It is operating vintage ships and submarines, whose seaworthiness is questionable and are accident prone. Army, which prides at being third largest standing army in the world, finds itself at the end of its tether due to chronic shortages of artillery guns, air defence equipment and ammunition. This revelation was not made by any doomsayer but by a Parliamentary panel in December 2014. Today, the Armed Forces have a large inventory of military hardware, which is urgently needed to restore parity, if not superiority with the arch rival Pakistan and pose a credible deterrence to China on the Northern borders and in the Indian Ocean.

6_Page_1On many occasions, India has articulated its intent to play a dominant role in South Asia, East Asia and Indian Ocean Region. Such aspirations were evident when Prime Minister Modi and US President Obama met in New Delhi in January this year. US wants India’s countervailing weight to rebalance Asian strategic tilt, while we are ourselves are concerned about rising Chinese influence in South Asia and Indian Ocean.

7_Page_1On February 28, when Union Finance Minister Arun Jaitley presented BJP-led NDA’s first independent Union Budget in the Parliament, the allocation for defence was anxiously awaited by the Armed Forces and country’s miniscule strategic fraternity. Defence has got INR 2,46,727 crore (USD 40.07 billion), which is roughly 1.73 per cent of India’s Gross Domestic Product (GDP) and 13.88 per cent of the total Central expenditure. If this is compared to 2014-15 budget, defence allocation is up by 9.87 per cent.

61.66 per cent of the defence budget is meant for “Revenue” expenditure—catering to pay and allowances and other maintenance and operational needs. Balance 38.34 per cent allocation is earmarked to be spent on “Capital” expenditure. This pattern has remained unchanged over the years. Capital expenditure at INR 94,588 crore is incidentally identical to budget estimate (2014-15), which was later trimmed to INR 81,965 crore. On the face of it, it looks robust, but after reading the fine print, it is clear that the Army, Navy and Air Force get only INR 32,276 crore (34 per cent) for hardware procurement and payment of tranches for signed contracts.

8_Page_2Defence allocations in the Union Budget have remained stuck in a well-treaded groove. Sub two per cent allocations of GDP and below 10 per cent hike from the previous budget seem to have become a ritual dole from the finance ministry—irrespective of Armed Forces’ pressing needs or massive defence spending by China (USD 132 billion in 2014-15).

Defence procurement has been mired into procedural delays also. Every year a tidy sum from the defence budget is surrendered as ‘unspent’ to treasury. This year too, INR 6,630 crore have been returned. While the Armed Forces fuss over chronic shortages, their own procurement procedures and fiscal management leaves a lot to be desired.

India has been largest importer of arms since 2010. Prime Minister Modi’s thrust on indigenisation and “Make in India” makes sense. But, it is bound to affect forces’ modernisation. It is quite tempting to indigenise an inventory, which is worth 5,55,700 crore, but in the absence of high technology defence R&D and production base in the country the idea is not going fructify in the near future. This may further push the gestation period of defence programmes. India’s fixation with indigenisation is not new. We should stick to high technology sectors only and not try to make everything from ‘pins to planes’. Limit of the FDI in defence production, though raised from 26 to 49 per cent is yet to elicit favourable response from major armament industries. Overzealous thrust on indigenisation is bound to delay Armed Forces’ procurement plans further.

Defence Research and Development Organisation (DRDO) and Ordnance Factories are key to India’s indigenous defence R&D and production. It was expected that these establishments will receive a major allocation in their capital expenditures. But, it is not so. DRDO gets INR 7,788 crore—8.21 per cent more, while the Ordnance Factories have received INR 760 crore—up by 13 per cent from 2014-15 budget.

However, Border Roads Development Board has been allocated INR 3,063 crore for development of strategic roads in the border areas.

Under the present government there have been at least three defence acquisition council meetings in which military hardware worth INR 1,20,000 crore have been approved for procurement. Present budget does not make enough allocation for such procurement.

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Pensions are not part of the defence budget; a separate allocation of INR 54,000 crore (more than 4,500 crore from previous budget) has been made. In the last budget, when the Finance Minister had allocated INR 1,000 crore to address ex-servicemen’s long standing demand of ‘one-rank-one-pension’, a hope has risen about its implementation in the current budget. He chose to remain silent on the issue, disappointing millions of veterans who are finding it difficult to make both ends meet on a meagre pension. While India does not want to initiate an arms race in the region, but it has to maintain strategic balance vis-a-vis Pakistan and China, for which modernisation is necessary. Funds are needed to modernise forces, mere rhetoric do not suffice. It is evident that the government has decided to go slow on defence modernisation and wait for Make in India to fructify. Repeated demand from Armed Forces and strategic fraternity for a defence budget which is three per cent of the GPD has been once again overlooked.

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The defence budget falls short of expectations. It is insufficient to regain conventional parity with the adversaries or to place Armed Forces in the high technology orbit. Government’s nonchalance, despite debilitating shortages and strategic compulsions, is disappointing.

By Colonel (Retd.) US Rathore

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