Budget 2016: The big challenge for MoD: Pruning revenue expenses to boost capital purchases

By Deba R Mohanty

In the previous part, assessments for resource allocations toward capital outlays for military equipment modernisation were made. Arguments on capital expenses essentially made three points: a) more weapons acquisitions are necessary, given the imbalance in the Indian arsenal due to problems of obsolescence and shortage; b) need for a well-planned systems acquisition across services for rationalised allocations; and most importantly, c) given the manpower intensive nature of Indian armed forces and contemporary and futuristic security needs, a balanced approach to resources allocations for national defence must be considered.

Budget 2016: The big challenge for MoD: Pruning revenue expenses to boost capital purchases


It is the third point – balancing ‘revenue’ and ‘capital’ allocations – which tops ministerial consideration, a problem grappled with by Indian military planners for decades. The fact is that India can not devote more resources toward military purposes than it ought to for a variety of reasons. At the most, it can allocate close to 1.8 or 1.9 percent of its GDP for national defence.

Realistically, one cannot expect more than this for the very simple reason that other national priorities would always precede national defence considerations. Analysts will cite data related to resources allotted in other countries, which is a futile exercise. The argument against such analytics would be that Indian national security, which includes resources allocations for national defence (MoD), internal security (MHA), military aspects of atomic energy (DAE) and space (Department of Space), cumulatively consume close to a quarter of central government’s budgeted expenditure. This is objectively confusing and subjectively debatable.

Given various considerations, revenue side of Indian defence budget does not seem to be coming down, despite noble efforts. Revenue expenditure for national defence refers to resources allocated for salaries, pension expenses for the 1.3 million strong armed forces, including infrastructure and welfare.

At times, it also includes revenue expenses for military/revenue infrastructure, which consumes a significant proportion of the military budget. This particular category caters to infrastructure spends on various projects like multi-billion dollar projects on married accommodation or military infrastructure, etc. Indian Army is the most manpower intensive organ for obvious reasons, while Air Force and Navy, including Indian Coast Guard personnel number less than the Army.

Trends for the past one and half decade suggest that revenue expenses for the Indian armed forces hover between 57 to 63 percent of the defence budget, depending on specific years when either capital budgets have eaten into the budget or unspent money from capital budget have helped the revenue side in percentage terms. In fact, revenue expenditure has as a trend indicator in percentage terms came down from a high of 78 to 81 percent during 1970s through to early 1990s to the current levels of 57-58 percent in the last three years. This may sound encouraging, but in actual value terms, it still accounts for a large chunk of the budget.

If recent projects and announcements are taken into consideration, this year’s budget could be somewhere near Rs 1,70,000 crore, primarily because of implementation of seventh pay commission compensation, one rank one pay (OROP) advances (in installments) and ex-servicemen health scheme (ECHS), to name a few. Only OROP advances could be as high as Rs 12,000 crore alone, according to one recent report.

Even if some unspent capital expenditure from last year is adjusted in some of revenue categories in revised estimates for 2015-16, the total defence budget is still likely to be heavily tilted towards ‘revenue’ vis-à-vis ‘capital’ expenditure. The projected figure would have been even greater, if creation of two mountain divisions were approved, which could have necessitated additional phased expenses to the tune of Rs 80,000 crore in the next three to five years.

In sum, against an ideal modern fighting machine for India that is lean and mean with advanced system support to undertake any conventional or emerging assignments, which should have a balanced ratio of 50:50 in its resources for soldiers and weapons, it appears to be struggling for a well-crafted and balanced budget.

Apart from the need for fine-tuning the revenue budget, which itself is a gigantic task and which has not yet been warranted by any quarter within the MoD simply because of lack of interest from either civil or military side, there are other constraints as well. Chief of the Army Staff General Dalbir Singh Suhag, in a recent interview to a major news paper, vehemently defended the manpower intensive nature of Indian Army and explained that due to the prevailing security scenario the number of soldiers should actually grow. His argument and a strong sentiment among serving and retired military personnel effectively put a blanket ban on any debate on right-sizing the armed forces. While there is no interest among members of the strategic community to deliberate on this subject, there is no evidence of it being discussed even within relevant government agencies.

Rightsizing, one should understand, does not necessarily mean reduction of numbers, a small step can begin by demobilisation of identified sections into other security agencies for specific roles for which necessary training and demobilisation related necessities can be undertaken on a pilot basis. China has in the past exercised this option by demobilising an estimated 2,50,000 soldiers to People’s Armed Police (PAP).

Some European countries during the post-Cold War period in the 1990s have also attempted rightsizing through demobilisation with varying degree of success. In India’s case, modernised soldiers require costly weapons and support, which otherwise means highly trained soldiers for specialised responsibilities at the core of the structure and support from other categories for conventional responsibilities. Military planners, it is high time, should contemplate on this aspect.

Indian defence budget cannot be stretched beyond an acceptable level and in a time of economic sluggishness world over with impacts on Indian economy, it would be interesting to examine larger nuances of defence budget this year.

The author is a New Delhi-based defence analyst and head of a defence research firm

Firstpost is now on WhatsApp. For the latest analysis, commentary and news updates, sign up for our WhatsApp services. Just go to Firstpost.com/Whatsapp and hit the Subscribe button.

Updated Date: Feb 25, 2016 16:44:39 IST

Also See