Inadequate budget allocation
In an otherwise pragmatic budget for 2015-16 that has been hailed as growth oriented, Finance Minister Arun Jaitley has not done enough to give a much needed boost to military modernisation. Also, the small hike in the defence budget will not be adequate to make up the critical deficiencies in India’s defence preparedness; nor will it help meet the growing threats and challenges facing the country and India’s increasing responsibilities as a regional power.
In fact, the increase of Rs 24,357 crore from Rs 2,22,370 (Revised Estimates for 2014-15) to Rs 2,46,727 (US$ 39.8 billion, Budgetary Estimates for 2015-16) is too low to even allow for inflation, which is ruling at about 6.0 to 7.5 per cent. The rupee’s steady slide against the US dollar to Rs 62 has eroded its purchasing power considerably. Annual inflation in the international prices of weapons, ammunition and defence equipment is generally between 12 to 15 per cent. Each year’s delay in the procurement of operationally critical items substantially increases the burden on the exchequer.
Of the total allocation for defence, the army will get Rs 1,04,158.95 crore, the navy Rs 15,525.64 crore, the air force Rs 23,000.09 crore, the ordnance factories Rs 2,884.23 crore, and the Defence Research and Development Organisations Rs 6,570.09 crore. The remaining amount of Rs 94,588 crore has been allotted on the capital account for the acquisition of modern weapon systems, including initial payments for 15 Apache attack helicopters and 22 CH-47F Chinook medium lift helicopters, C-17 heavy-lift aircraft and frigates and submarines.
The armed forces also need to upgrade their command and control systems and substantially improve their intelligence, surveillance and target acquisition capabilities if they are to become proficient in launching effect-based operations in a network-centric environment riddled with threats to cyber security. It is well known that India plans to spend about US$ 100 billion over 10 years on defence modernisation.
It has been the practice to return large chunks of funds unspent year after year. The funds earmarked on the capital account were fully spent by the government for the first time in 2011-12. In the current year (2014-15), the MoD was unable to spend Rs 12,622 crore from the funds allotted for modernisation. Of this, an amount of Rs 5,992 crore was diverted to the revenue account for routine expenditure. The remaining amount of Rs 6,630 crore is once again proposed to be returned unspent to the exchequer.
As a ratio of the projected GDP for 2015-16, India’s defence expenditure is pegged at 1.78 per cent. India will spend 13.88 per cent of the total central government expenditure on defence this year. Parliament’s Standing Committee on Defence has repeatedly recommended the gradual raising of defence expenditure to 3.0 per cent of the GDP.
However, the 13th Finance Commission had recommended that the nation’s defence expenditure should progressively come down to 1.76 per cent of the GDP by 2014-15. Successive finance ministers appear to have decided to pay heed to this unjustifiable advice.
While India’s military modernisation has been stagnating, China’s People’s Liberation Army (PLA) and its sister services – the navy, the air force and the nuclear strike force the second artillery – have been modernising at a rapid pace for over two decades, backed by a double-digit annual hike in the defence budget. China’s official defence budget for the year 2015-16 is US$ 145.68 billion, 10.10 per cent more than the previous year and it is over three times more than India’s planned defence expenditure. As China invariably conceals many items of expenditure on security, its actual expenditure is likely to be over US$ 160-170 billion.
China is investing heavily in modernising its surface-to-surface missile firepower, fighter aircraft and air-to-ground strike capability. It is acquiring strategic airlift capability, modern aircraft carriers, new submarines, improving command and control and surveillance systems and is enhancing its capacity to launch amphibious operations. It is also upgrading the military infrastructure in Tibet to sustain larger deployments over longer durations. Besides an all-weather railway line to Lhasa, China is engaged in constructing new missile bases, airfields and roads and military encampments close to the border.
Despite the long list of obsolescent weapons and equipment in service with the Indian armed forces, the present military gap with China is still quantitative rather than qualitative. In case India’s military modernisation continues to stagnate, this gap will soon become a qualitative one as well. By about 2020-25, China will complete its military modernisation and will then be in a position to dictate terms on the resolution of the territorial dispute if India continues to neglect defence preparedness.
The reasons for India’s lackadaisical approach to military modernisation include the shortage of funds on the capital account for major defence acquisitions, the inability to spend even the allotted funds due to bureaucratic red tape in decision making and the lack of a robust indigenous defence industry because of excessive reliance on uncompetitive ordnance factories and defence PSUs. The way forward is to ‘make in India’ with transfer of technology, but rely more on the private sector rather than the ordnance factories and the DPSUs and better manage the defence budget.
Given India’s increasing vulnerabilities and rising international demands on it to act as a net provider of security as a rising regional power, the country’s defence expenditure is inadequate to create the capabilities that the armed forces will need in future. India’s political leadership and the bureaucracy that guides it must learn to look at defence expenditure as a form of insurance: if properly utilised, it deters military adversaries from contemplating war and enables the armed forces to acquire the capabilities necessary to fight and win if deterrence fails.
(The writer is former Director, Centre for Land Warfare Studies, New Delhi)