Thursday, 13 October 2016

Raise the defence budget



By Ajai Shukla
Business Standard, 13th Oct 16

Last month’s terrorist strike in Uri and India’s retaliatory strikes across the Line of Control (LoC) show how quickly military tensions can flare up in South Asia. Yet India’s military remains worryingly unprepared for serious escalation, especially when faced with the obvious threat from a more assertive and expansive China. As things stand, over 85 per cent of the defence capital budget is spent on pre-committed items and there is little money left to buy anything new.

This at a time when the military is facing serious shortfalls in combat aircraft, warships and submarines, air defence units and even basic combat kit like helmets, boots and bulletproof jackets. Specifically for the army, India needs night vision equipment, a modern rifle for the infantry, new howitzers for the artillery and light tanks for the armoured corps. Not to mention that the ammunition stockpiles are insufficient for prolonged hostilities. A report last year by the Parliament’s Consultative Committee on Defence unequivocally demanded more money, stating that defence allocations were insufficient for running the military (revenue budget) as well as buying new weaponry (capital budget).

Yet, India’s defence allocations remain disconcertingly stagnant. Comparing defence budgets year-to-year has been made difficult by this year’s change in accounting methodology. Even so, comparing on an apples-for-apples basis, this year’s defence allocations as a percentage of the gross domestic product (GDP) are the lowest since 1962. That year, after the military’s humiliating defeat at the hands of China, the defence budget had to be revised mid-year.

India’s shopping list for weaponry for the 15-year period from 2012-2027 is clearly spelt out in the Long Term Integrated Perspective Plan (LTIPP). Yet capital allocations seem not to budget for the money required. This year’s capital allocation of Rs 86,340 crore is about the same level as the past two years’ capital budget. And, like in those years, it has about 90 per cent pre-committed towards instalments on purchases made during preceding years. The amount earmarked for new purchases is so low that it has been exhausted on just one purchase alone --- the Rafale fighter, whose 15 per cent signing advance amounts to Rs 8,700 crore.

Additional allocations are now required for fresh acquisitions over the remaining half of 2016-17. At present, defence allocation amounts to Rs 3,41 lakh crore this year, or 2.26 per cent of GDP. With additional allocations inevitable, the revised estimates should officially raise defence spending to 2.5 per cent of GDP. This should be raised next year to 2.75 per cent and to three per cent in 2018-19, which should be the level thereafter.

But merely throwing money at the problem will not boost defence readiness. In previous years, a significant chunk of the capital budget has been surrendered unspent. To avoid this, the defence ministry must iron out its planning and acquisition processes. This would require the ministry to be staffed by specialists in security administration. To be sure, there are other issues for the government to look at. For instance, defence production units such as Mazagon Dock must learn to deliver on schedule; China builds a destroyer in three years while India takes eight to 10 years. India also needs more private sector participation in defence production as this will help make more weapons components in India. Lastly, the weapons acquisition process must be radically shortened; as an example, formal tendering to buy two Rafale fighter squadrons has taken so long that deliveries will begin in 2019, 15 years after the initial request for information went out to manufacturers. In this regard, the military too needs to develop expertise in equipment planning and procurement, especially in activities like drawing up specifications --- currently framed so expansively that most vendors are unable to fulfil the requirements. 

3 comments:

Anurag said...

Ajai sir,
Earlier this year during budget month, you talked about India's defense expenditure as percentage of total budget expenditure. That is a more correct way to understand a government's commitment towards it's armed forces. Military expenditure comes solely from union government. No state government or pvt sector company contributes to any country's defense budget. But GDP consists of both private and public expenditure, that too of both state and union government. So defense budget as percentage of GDP is just a figure and it tells us nothing.

For eg. Consider China in 2014.
Military budget = $131 bn officially or may be $200 bn unofficially
GDP = $10 Trillion
Total Budget expenditure = $2.4 Trillion
Defense budget as % of GDP = 1.3% (Official) and 2% (unofficial)
Defense budget as % Total budget = 5.4% (Official) to 8.33% (Unofficial)

Similarly for USA in 2014
Defense budget = $614 bn
GDP = $17 trillion
Total Budget exp = $3.7 trillion
Defense budget as % of GDP = 3.6 % of GDP
Defense budget as % Total budget = 16.5% to 17%

Now you already know data for India which is
Defense budget = Around 1.7 % of GDP
But Defense budget = Around 18% of total budget exp .

Further if you look at data of many European countries i.e their defense budget as percentage of total budget exp, range is always 5-8 % only. But India spends 18% which is more than twice of CHina and is even higher than that of USA.

Again my point is this only that a government's commitment for military is better reflected by defense budget as percentage of total budget and NOT by defense budget as percentage of GDP. Therefore the ceiling you gave for defense budget 3% of GDP should be modified and given as % of total exp.

To conclude, I can only say that even though Indian military faces shortages and wages related issue, to expect that defense budget would be increased significantly is simply unrealistic, as India already spends way more than most of the other countries.

Rajinder Verma said...

Why do we see it as combat aircraft, warships and submarines, air defence units and even then basic combat kit items like helmets, boots and bulletproof jackets. Why is not the other way around; initially buy basic combat kit like BPJs, boots, helmets, night vision etc ... the stress seems to be on big ticket items and these will all rot on the shelf of deterrence ... the other LowBudget items on the other hand get used day in day out 365 days. These need to procured in double time .... Rafael Jets will be a waste if not used to strike back!!

Alok Asthana said...

Expecting the MOD to do ANYTHING to be of help to the armed forces is worse than wishful thinking. It is stubborn refusal to acknowledge what everyone knows.