Budget 2016: Despite the Make in India call it is not all that rosy for defence. Here’s why

By Prakash Nanda

Life is such that success or strength of a person is dependent on how narrow is the gap between one’s desire and the reality. So is the case with the military strength of a nation. Each component of our defence establishment, which consists of the Army, Air Force, Navy, Defence Research Development and Organisation (DRDO) and the Ordnance Factories, has its wish list. But that wish list is greatly compromised when the finance minister presents his budget proposals every year. Will Arun Jaitely prove different and become a darling of our armed forces this time? Highly unlikely.

Budget 2016: Despite the Make in India call it is not all that rosy for defence. Here’s why


Military wish-lists are based on the actual state of affairs prevailing in each of our services and establishments, the regional strategic environment and the power projection made by the political leadership of the day.

To take the last point first, Prime Minister Narendra Modi wants to establish India as a preeminent power in the Asia-Pacific region; this requires our forces to display their power in the Asia-Pacific region, particularly in between Strait of Hormuz and Strait of Malacca. But it is an open secret that all the three wings of Indian military are short of critical components.

The Army suffers from the shortage of armament and tank ammunition. The deficiency of gun systems has been allowed to reach to the criticality. Indian soldiers do not have even enough bullet-proof jackets.

The Indian Air Force presently has only 31 combat-ready fighter squadrons against the sanctioned strength of 42 squadrons. Similarly, capital funds of less than 8 percent of the naval budgets are highly inadequate to procure and build the systems in pipeline — aircraft carrier, frigates, offshore patrol vessel and survey catamarans.

The front of submarines appears problematic. Then there is the vital question of weapons systems for the submarine fleet as a whole, not to speak of the rationalisation of surface ship-based anti-submarine warfare capabilities of a true blue water Navy that the Modi government dreams of.

As if this is not bad enough, despite all talks of indigenisation, India still imports 70 percent of its military equipment; in fact, it is the largest importer of arms in the world. Modi’s ‘Make in India’ in the defence sector requires huge investments to begin with, even if the private sector is going to be a partner. DRDO needs a big financial boost to create the necessary scientific and technological pools for the success of the indigenisation programmes.

Considering all this, it is no big surprise why the Parliament’s Standing Committee on Defence has been repeatedly recommending the gradual raising of defence expenditure to 3.0 per cent of the Indian GDP.

But in reality, India has been spending (as per the defence budget of 2015-16) only 1.74 percent of its GDP on its military. In fact, there has been a gradual decline of the ratio over the recent years - during the year 2009-10 it was 2.20 per cent of the GDP.

Similarly, the defence expenditure as the percentage of the total Central government expenditure as such has declined from 13.84 per cent in 2009-10 to 11 per cent in 2015-16. It may be noted here that the United States spends 4.0 per cent of its GDP on defence, Russia 4.5 per cent, France 2.2 per cent, Britain 2 per cent, Israel 5.2 per cent, China 2.5 per cent and Pakistan 3.5 per cent. Similarly, India’s per capita expenditure on defence is less than $10, while the average expenditure of the top ten spenders in Asia is $800.

The Modi government has presented one interim budget in 2014 and one full budget in 2015. Seen in numerical terms, it gives an impression that last year it increased the defence budget over the 2014 one by Rs 24,357 crore (US$ 3.92 billion) - from Rs 2,22,370 (US$35.86 billion, Revised Estimates for FY 2014–2015) to Rs 2,46,727 (US$39.8 billion, Budgetary Estimates for FY 2015–2016).

But in concrete terms, there was a great decline. Just consider the rate of inflation of 6.0 to 7.5 percent over the year and rupee’s steady slide against the US dollar (the currency through which we buy arms and ammunitions), resulting in an erosion of the purchasing power in a global arms market where things get increasingly expensive with every passing year.

It is noteworthy that the bulk of our defence budget is spent on the ‘revenue’ side, that is, manpower (salaries and perks) and maintenance of the existing resources, leaving little on the ‘capital’ front for developing and buying sophisticated but vital arms and ammunitions systems to win wars.

The situation is going to be worse now that the Seventh Pay Commission’s recommendations are going to be implemented (defence pensions and civil expenditures on the defence, however, do not constitute the part of the official defence budget).

Last year, as much as 80 per cent of the budget was earmarked for the revenue expenditure. And here, the share of the Army happens to be the highest. Last year, with Rs. 1,30,874 crore, the Army’s share was 53 percent of the total defence budget, as against Air Force’s 23 percent, Navy’s 16 per cent, DRDO’s 6 percent and Ordnance Factories’ 2 per cent. But then what is worse is that not only the funds for ‘capital’ acquisitions are meagre; these are also not spent fully by the government because of its tardy defence procurement procedure (DPP).

The result is that more often than not funds earmarked on the capital account are diverted to the revenue account for routine expenditure. Thus, the process of military modernisation gets dented in a big way.

Finally, there will be further bad news for the military, if while preparing the defence budget, the finance minister goes by the recommendation of the 14th Finance Commission that the revenue account for the defence (it does not talk at all about the capital account) should remain at 1.02 per cent of the GDP. And with the GDP having not grown beyond 7 per cent over the last one year, India’s defence expenditure touching the ideal target of 3 per cent of the GDP appears a distant goal.

The author is Editor of Geopolitics, a military journal

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Updated Date: Feb 18, 2016 19:44:57 IST

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