Jaitley’s Defence Budget Grossly Inadequate to Modernise the Army

Given the continuously increasing threats and challenges to national security, particularly the possibility of a two-front war, the funds earmarked by the Finance Minister for defence expenditure for Financial Year (FY) 2018-19 are grossly inadequate. The defence budget proposed in the budget speech on February 1, 2018 for the next financial year will neither enable the armed forces to achieve the required levels of defence preparedness, nor permit them to undertake the military modernisation that is necessary to acquire the desired combat capabilities.

According to a statement issued by the Ministry of Defence (MoD), a sum of Rs 2,95,511.41 crore (excluding pensions) has been earmarked as budgetary estimates (BE) for FY 2018-19. This is 7.81 per cent more than the BE for FY 2017-18 (Rs 2,74,114.12 crore) and 5.91 per cent more than the revised estimates (RE) for the year (Rs 2,79,003.85 crore). Leave aside modernisation, the nominal increase is unlikely to contribute even towards making up the shortages in ammunition and equipment as it is barely sufficient to allow for the annual rate of inflation.

Other budgetary parameters too show a downward trend. The allocation of Rs 2,95, 511.41 crore for FY 2018-19 is 1.57 per cent of India’s projected GDP for the year. It is projected to be approximately 1.60 per cent of the GDP for FY 2017-18 and was 1.65 per cent in FY 2016-17. At its peak, during the 1980s, the defence budget was 3.5 per cent of the GDP; since then there has been a steady decline.

No matter which yardstick India’s defence expenditure is measured by, it is among the lowest in the world. As a ratio of the Total Central Government Expenditure (TGE), the share of defence is 12.10 per cent for FY 2018-19. In Pakistan, it is 25.00 to 30.00 per cent of the TGE. While India has 1.25 soldiers per 1,000 people, China has 2.23 and Pakistan 4.25.

The ratio of capital to revenue expenditure is also far from the ideal of 50:50. (Capital expenditure is that which is incurred on new acquisitions for modernisation and the replacement of obsolete weapons and  equipment plus land and buildings. The revenue budget is for expenditure on salaries, ammunition, transportation, clothing and maintenance, et al.)

Of the defence budget of Rs 2,95,511.41 crore for FY 2018-19, Rs 99,563.86 crore (33.7 per cent) is for capital and Rs 1,95,947.55 crore (67.3 per cent) is for revenue expenditure. Manpower costs take away a large chunk of the defence budget. As the army is manpower intensive (1.2 million personnel), its capital to revenue expenditure ratio is as low as 17:83.

The net effect of consistently low capital budgets is that obsolescent vintage weapons and equipment in service are degrading combat efficiency and no modernisation is taking place, particularly in the army. The worst impact is the inability to acquire precision guided munitions and to modernise the command and control and intelligence, surveillance and reconnaissance systems of the armed forces, even as the three wings of  the People’s Liberation Army of China are modernising at a brisk pace.

The pension bill for the ensuing financial year (Rs 1,08,853.30 crore) is projected to rise by 26.60 per cent over FY 2017-18 (Rs 85,740 crore, BE). This is more than the capital expenditure planned for the year! Surely, urgent steps need to be taken to adopt innovative measures to reduce the costs of manpower in the armed forces even if the number of personnel in uniform cannot be drastically reduced immediately due to manpower-intensive deployments on the LoC with Pakistan and the LAC with China as well as for counter-insurgency operations in J&K and many of the north-eastern states.

On the positive side, in his budget speech the Finance Minister announced the completion of the Rohtang Pass tunnel that will provide an all-weather route to Ladakh, expressed the government’s satisfaction on the progress of work on the Zojila Pass (J&K) tunnel and declared the government’s intention to construct a tunnel under Sela Pass (Arunachal Pradesh). He also said that the government will establish two military-industrial corridors to give a boost to indigenisation. The Defence Minister later said that the first of these is likely to come up in the Tamil Nadu-Karnataka area.

Finally, China and Pakistan, India’s military adversaries, spend 2.5-3.0 per cent and 3.5 per cent, respectively, of their GDP on defence. Parliament’s Standing Committee on Defence has repeatedly emphasised that defence expenditure should be progressively raised to 3.0 per cent of the GDP.

India’s quest for “defence on the cheap” can only lead to another debacle like that of 1962. Even then, the defence budget had fallen to less than 2.0 per cent of the country’s GDP.

It has been empirically proved that defence expenditure up to 2.5 to 3.0 per cent of the GDP has a positive impact on the growth rate of a country’s economy. The government must gradually provide more funds for defence to enable the armed forces to acquire the combat capabilities that are necessary to fight and win tomorrow’s wars.

Simultaneously, the government must pull out all the stops to genuinely encourage indigenous manufacture of weapons and defence equipment. India’s aspirations to be counted as a regional power capable of maintaining peace and stability in the Indo-Pacific in conjunction with its strategic partners and as a nation striving for world power status, cannot possibly be realised without self-reliance in defence acquisition.

The writer is Distinguished Fellow, Institute for Defence Studies and Analyses (IDSA), New Delhi. Views are personal.