Military modernisation needs more moolah

At Rs 2.5 lakh crore (approximately $36.6 billion), the defence budget for 2016-17 accounts for 13 per cent of the total central government expenditure. The ratio of revenue to capital expenditure is now 65: 35, an increase in the revenue side as the earlier ratio was 60:40, possibly to cater to the 7th Pay commission.

 The revenue expenditure has increased by 13. 6 per cent whereas there has been a subdued growth of 6 per cent in capital expenditure, over the previous years’ revised estimates. This increase in capital expenditure of Rs 25,328 crore is more than neutralized by the annual inflation rate and the steep fall in the value of the rupee against the dollar.

 It is not sufficient for the planned military modernisation that is necessary to meet the emerging threats and challenges, if the requirement of deployment of troops, training exercises with forces all over the world and movement of troops for internal security is going to remain as contemplated. 

In this Budget, it was evident that the priority the government was to provide additional resources for vulnerable sections, rural areas and social and physical infrastructure creation.

 In order to better utilize the limited capital outlay, the ministry of defence will have no option but to commence a process of reworking out inter service priorities – which has to start by ironing out the differences between the services.

 It will have to plan for efficient financial management which would require reprioritization of acquisitions, review the process procurements to ensure that these get realigned to the countries needs of meeting internal security requirements, kick starting Make in India program for defence or to cater to the strategic imperative of increasing our area of influence and interest, all of which are important in their own sphere. 

The MoD might as well also ensure that in future the funds from the capital outlay are not surrendered.

The 7th Pay Commission has had its effect on the Budget. To give an example, the pay and allowances of the three services and DRDO now constitutes more than 60 per cent of the revenue budget. Earlier this was 45 per cent of the revenue budget. The Budget has kept its focus of promoting private sector involvement in defence production.

(The author is the Director of Aerospace and Defence at PwC India)