Budget 2016: Why India’s great power ambition cannot do without focus on R&D

By Deba R Mohanty

Indian defence budget has never received the attention it deserves. Once the Union Budget is presented, a few defence correspondents and strategic analysts swing into action and cite all available data. They try to interpret these through budgetary lenses. This is either usual reportage or ad-hoc analytics. Rarely do they go deeper and ask fundamental questions.

Budget 2016: Why India’s great power ambition cannot do without focus on R&DIt must be understood that deployment of resources by the state can be objectively identified, but results are subjectively interpreted. This is more complicated in the field of national defence where general data is available but specifics elude analytical interpretation. To cite, India spends slightly more than $ 40 billion for national defence (1/12th of what the US spends or 1/3rd of what China spends). It spends less than 1.8 percent of its GDP (US spends 4 plus percent, while China spends close to 6 percent). Interpreted thus, India is actually underspending.

However, if India spends close to 2 percent (or even 3 percent as suggested by the 13th Finance Commission in 2013), its defence expenditure has to touch nearly one and half times of what it spent last year. This is highly unlikely under current circumstances, even though India has witnessed a GDP growth of 7.3 percent in turbulent global economic conditions.

Indian defence budget is conventionally about ‘revenue’ or ‘capital’ allocations. We talk about how much money the armed forces should spend for their salaries, pensions, infrastructure, weapons, services, etc. But it is high time we contemplated on investments into real military capability development. This can only happen when the State allocates adequate resources for military R&D and industrial capacity development. If great powers invariably possess great arms industries, as history has repeatedly demonstrated, it is high time that India allocate a significant portion of its resources toward military R&D and industries. Has it done the needful? An in-depth examination shows to the contrary.

Technically, defence R&D budget is a part of Indian defence budget, so are budgets for defence industries, specifically the Ordnance Factories (OFs). The latter is always in negative territory, suggesting that state-owned defence industries seldom receive central grants, rather they contribute to national exchequer by providing dividends through profits as they claim. However, a recent study by Josy Joseph of The Hindu, demonstrates that bulk of Indian defence PSUs have shown profits, not through selling of products but through interest accruals from their advanced receipts collected from their customers – Army, Navy and Air Force! As a recent entrant, the private sector’s contribution to national resources minimisation has not yet begun. In sum, domestic industrial capacity has yet to show desirable results.

Indian military R&D budget goes to DRDO, the organisation responsible for design, development and innovation in military systems and technologies. Its budget has been hovering between Rs 8,000 crore and Rs 12,000 crore in the last five years, which roughly accounts for less than 6 percent of the defence budget. Imagine a country which devotes less than 6 percent of its meager budget and expects its premier military scientific establishment to design fifth generation systems!

The bulk of the DRDO funding goes into existing or on-going design and development programmes, leaving very little for new projects. This trend almost reminds us of deployment of capital expenditure, where ‘committed liabilities’ far outnumber ‘fresh acquisitions’. Almost all specialised domains, which are directed by Director General (seven in number) and Chief Controllers (six in number) with ten technology clusters (spread across 51 laboratories) are now responsible for execution of projects and accountable to the Defence ministry.

Beyond resources for DRDO, which appears unable to spend bigger budget, there are issues that require attention. India is the only major country in the world where military R&D (DRDO) and production (Defence PSUs and Ordnance Factories) are distinct organisations; horizontal and seamless institutional interactions are almost non-existent. As like other organs, DRDO is also vertically structured, with representation at the top decision making bodies. Chief of DRDO used to wear three hats, which has now been reduced to two. Efforts to reform DRDO (implementation of P Rama Rao Committee recommendations) has not yielded desirable results. Sacking of the previous DRDO chief and appointment of two scientists as head of DRDO and scientific advisor to the defence minister are instances in recent times which may pave the way to some structural changes in future.

A comparative assessment of military R&D budgets of major countries suggest that while India spends around $2 billion, the US spends close to $90 billion, China has significantly raised its budget to $ 40 billion (almost equivalent of India’s defence budget!), so has Russia, whose R&D budget is close to $ 18 billion. China’s spectacular record in accounting for nearly 13 percent of the global military expenditure is indicative of its growing military prowess and its decision to invest heavily in R&D speaks volumes of its super power intent.

The US has consistently increased its investment in R&D. Consider this: post-Cold War American military resources allocations plummeted by 40 percent between 1989 and 1996, where most of the organs witnessed massive cuts, but R&D budget was untouched. Major powers understand the importance of innovation and quality R&D in military sector, which along with industrial capacity make them powerful. India should understand this and deploy at least 10 percent of its budget for R&D.

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

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Updated Date: Feb 26, 2016 16:57:24 IST

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