Union Budget 2018: Why India needs annual defence allocation of 3% of GDP

A recent editorial in a national daily has cited, among other reasons, professional misgivings over persistent shortages of weapons and systems - combat aircraft, submarines and artillery pieces head the list that trickles down to a reliable rifle, safe helmet and body armour causing unhappiness in the army. Voids are permitted to grow because of multifarious reasons including vested interests that capitalize on creating criticalities to facilitate imports for individual and collective benefits in the face of emergencies.

A recent example is cancellation of the ‘Make in India’ project for 12x advanced minesweepers or mine-counter measures vehicles (MCMVs) in collaboration with the South Korean firm at Goa Shipyard . For the whole process to start again means years of delay.

Goa Shipyard, which has already invested over Rs 700 crore in infrastructure for construction of the MCMVs, will take almost a decade now. More delay implies a devastating adverse effect on our Navy that is making do with six 30-year old minesweepers that are to be de-commissioned by end 2018. Compare this with China having some 100 minesweepers, its conventional and nuclear submarines prowling the Indian Ocean, and Chinese capacity to lay mines. Mines that cost a few hundred dollars can cause immense damage to the Navy or sea-borne trade.

The Niti Aayog stated last year that the new 15-year long-term vision being worked out would also include defence and internal security. While Niti Aayog matches the MoD in not having any military professionals, the issue is how can a 15-year defence plan be worked out in the absence of a national security strategy (NSS), which no government has bothered to define since Independence, and without undertaking comprehensive defence review (CDR)? All the previous Long-Term Integrated Procurement Plans (LTIPPs) have also been worked out without a NSS and a CDR. Ironically, the higher defence set up and the MoD continue to be sans military professionals because the government remains straight-jacketed in the time wrap of the bureaucracy.

Representational photo. Reuters

Representational photo. Reuters

Lack of NSS and CDR affects holistic procurement planning, resulting in haphazard purchases, as can be seen by the looming near-zero minesweeping capability that should have been addressed past several years. Leasing odd minesweepers will hardly address the gap considering the aggravating situation in the Indo-Pacific.

What defence allocations for Financial Year 2018-2019 will be announced by the Finance Minister in the Union Budget on 1 February is awaited with trepidation in the military considering that successive defence budgets under the present government have been low, and is presently pegged at just 1.5 percent of the GDP.

It must be noted that the LTIPP for period 2012-2027 that stood approved by the Defence Acquisition Council (DAC) headed by the Defence Minister, as also the 12th Five Year Plan, were based on a defence allocation at “3% of GDP”. But the allocation of defence has always been much below that, which also must be seen in the backdrop of the capability gap between our military and the PLA. CAG reports point out that equipment provided by DRDO is sub-standard and provisioned at excessive costs, as also obsolete holdings of weapons, weapon systems and equipment by the military. Besides new raisings and modernisation too needs to be catered for.

It may be recalled that defence allocation for FY 2015-2016 and FY 2016-2017 were same 2,46,727 crore. Media was quick in calling the allotment of 2,74,114 crore for FY 2017-2018 as a 6.2 percent hike. But it was naïve to not view this defence allocation in backdrop of the rupee depreciation and yearly inflation rates of defence procurement. It is also noteworthy that defence allocation of 2,46,727 crore in fiscal 2015-2016 also stood at $40 billion, while 2,46,727 crore in last fiscal (2016-2017) went below $40 billion in actual terms.

In addition to the voids of NSS and CDR, our pre-budgeting process also needs an overhaul. In the present context, the three Services project their demands to the HQ Integrated Staff (IDS), which forwards the compiled demand to MoD. After some minor tinkering, MoD sends it to the Ministry of Finance. The Finance Minister puts arbitrary cap on defence allocations, without considering operational necessities.

In sharp contrast in the US, a Congressional Committee is formed to which all Theatre Commanders and Commander Special Operations Command (SOCOM) make pre-budget presentations; covering what their present operational capabilities are and given funds requested based on what their future operational capability would be. It is then that the Congressional Committee projects budget requirement to the Congress. There is no reason we can't have a similar system especially when Parliament's Standing Committee on Defence is headed by a two-star military veteran. Let this committee project the budget requirements to the government in writing with operational justifications, which will go on record.

There is also the issue of surrender of funds from the defence budget, which is not done by any other ministry, albeit there are occasions when complete defence budget has been utilized in a particular financial year. The reason of surrender of funds is because of red-tape that at times is deliberate, for ‘inducing’ surrender.

A former Vice Chief of Army Staff who had a close friend in MoD (Finance) was told by the latter that they have to give a quarterly report as to how much money 'can' possibly be surrendered from the defence budget. Jaswant Singh, Defence Minister during NDA I, had mooted the idea of carrying forward unspent defence budget to the next financial year. This was also recommended in various reports by the Parliamentary Standing Committee on Defence but the idea was given a quiet burial. The recent reform announced about ‘Roll On' plan for fresh acquisitions can overcome 'surrendering' funds at the end of every FY is a misnomer, as it still leaves loopholes.

The year gone by has seen expanding China-Pak nexus resulting in heightening proxy war against India. China's PLA has made strategic lodgment in Gilgit-Baltistan and Gwadar port. Nepal, Maldives and Sri Lanka have opened their arms to China. Chinese assertiveness along the entire Himalayan belt has increased, with new probing actions such as in Tuting area last December.

China supports Pakistani radicals at the UN, continues aggressive moves even after the Doklam standoff, and its state media threatens. China can destabilize our northeast if India pressurises Pakistan in Kashmir. We need to address cumulative critical deficiencies of the military, need for modernisation and adverse strategic fallout of a 'hollowed' defence. In addition, operational requirements indicate why India needs annual defence allocation of 3 percent of GDP.

The Parliamentary Standing Committee on Defence has pointed out that meagre funds for the armed forces as a whole, cannot be justified through standard answers like, 'The allocations made to the Services are based upon the ceilings conveyed by the Ministry of Finance'. Hopefully, the government will keep this in mind.

(The author is a retired lieutenant-general of the Indian Army)


Updated Date: Jan 17, 2018 09:59 AM

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