Budget 2016: The time is ripe for a hard look; Parrikar has made his point

By Deba R Mohanty

Defence Minister Manohar Parrikar has made the following important points in the current session of Parliament and elsewhere in the last one month: a) if pensions for forces are included in the defence budget, it could account for 2.2 percent of the GDP; b) eight squadrons of light combat aircraft in the next eight years; c) world’s highest battlefield in Siachen Glaciers would not be vacated; d) all service chiefs should review and cancel old and irrelevant defence purchase proposals; e) India is seriously considering fighter plane purchase under ‘Make in India’ category; and f) transparent defence procurement will save money.

Budget 2016: The time is ripe for a hard look; Parrikar has made his point

Defence Minister Manohar Parrikar. PTI

Security considerations aside, most of these statements have one thing in common – how to rationalise resources for maximization of India’s national defence interests. None of his predecessors have touched upon so many important points in such aplomb in a relatively short time, which otherwise suggests that he is firmly settled in his position and is not afraid of opining on contentious issues.

What kind of a defence budget is the government likely to propose this year? Will it witness a substantive increase beyond an average increase of 12 percent from previous year’s revised estimates to be somewhere between Rs 2,80,000 crore and 3,00,000 crore (last year’s budget was Rs 2, 46, 727 crore)? How will a modest increase, say for example, increase of 7-8 percent, be viewed at by the country in general and armed forces in particular? Most importantly, how much should India ideally allocate for its national defence purposes? Such questions need in-depth examination.

Resources allocations on national defence can be broadly analysed based on facts and figures (although minor details on specifics still elude research-based interpretations), but relating them to results on ground is always a subjective interpretation. This is the reason why, in the absence of detailed data and when blended with aspirations of armed forces, Indian defence budget is always perceived to be deficient, especially by retired military officers, bureaucrats and journalists. As analyses on defence budget seldom get into fundamentals, deficient resources allocations overwhelm our collective imagination.

A set of four perceptions needs to be deconstructed. First, India is spending much less in comparison to its known adversaries as well as (known) major powers. This is largely true in terms of military expenditure in both current and constant prices. In both terms, the percentage of US military expenditure has come down from 53 to 42 percent in the last five years, while the same has graduated from 8 to 12 percent China in the corresponding period. Many such data based inferences can be drawn. India’s share is slightly below 2 percent of global military expenditure, an improvement from 1.4 percent from 2010. Such figures are confusing for the very simple reason that bulk of military expenses, as provided by countries on a yearly basis, disclose little of their resources allocations and hide some details.

Second, at the national level, India is supposedly spending less on national defence. Parrikar deconstructed this notion in his statement in Parliament, unprecedented in the history of budgetary estimates in India. As repeatedly argued in my previous pieces on resources allocations for national defence over a period of time, India’s spending on national defence has been reasonable, keeping in mind our cumulative national resources and priorities.

India’s declared devotion to national defence stands roughly at 14 percent of central government expenditure (CGE) and about 1.7 percent of GDP, which excludes pensions and a few other items. I am told by members from responsible quarters that items like ‘military stores’ contain items that should actually be in ‘capital’ side. Taken together, as Parrikar said, India’s defence budget would account for 2.2 percent of GDP. Please note that last year’s defence pensions was close to Rs 56,000 crore. You have to factor in OROP (Rs 12,000 crore), ex-welfare health insurance (close to Rs 2000 crore) and 7th pay commission liabilities (exact figure yet to be in public domain) in time to come. Such expenses, if included in ‘revenue’ side of expenditure, could actually radically deconstruct our earlier assumptions about a 55 (revenue): 45 (capital) ratio, in favour of revenue expenditure – a horrendously imbalanced national defence budget. Parrikar must be applauded for bringing this anomaly in defence budget calculations.

Third, Parrikar’s statements on eight squardons of fighters, emphasises fighter aircraft production through indigenous means, transparent procurement procedures for pruning of capital expenses and abandoning of long-pending and irrelevant purchases, point to one simple point with three connotations – tighten your belt, be ready for collaborative approach but make products and systems here, and most importantly, be ready for a pruned budget. He has already given a hind that against an import bill of Rs 35,000 crore in 2014-15, a Rs 1,000 crore reduction has already been witnessed in 2015-16. This indicative trend is likely to continue till he is at the helm of affairs.

Last but certainly not the least, Parrikar, a minister who seems to ask basic questions and has demonstrated a habit of shaking rank and file of organs he heads (sacking of the head of DRDO without much murmur in public, branding armed forces as ‘erratic buyers’, instructing armed forces to review their defence procurement plans, to cite a few), must have advised his colleague Arun Jaitley on what kind of a budget he wants.

Indian defence budget 2016-17 is thus going to be a defining development, to say the least. Each aspect of the budget needs to be deconstructed further.

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Updated Date: Feb 28, 2016 19:50:41 IST

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