The finance Minister has hiked the defence budget for FY 2015-16 by 9.46 per cent to Rs 2,46,727 crore, which is Rs 23,357 crore more than the revised estimates for the current financial year that stand at Rs 2,22,370 crore. This small increase is grossly inadequate to give a boost to military modernisation that has been stagnating for over a decade.
…the steep fall in the value of the rupee against the US dollar vis-à-vis the traditional rise in the global prices of arms – was insufficient to give a major boost to the military modernisation….
In the budget for FY 2014-15 presented in July 2014, Finance Minister ArunJaitley had increased the allocation for defence by 12.5 per cent over the amount allotted for 2013-14. The minister had hiked the defence outlay from Rs 2,03,672 crore (Revised Estimates – RE) in 2013-14 to Rs 2,29,000 crore (Budgetary Estimates – BE) for 2014-15. The defence budget for the current financial year stands at a low 1.74 per cent of India’s projected GDP for 2014-15 and accounts for 12.75 per cent of the country’s total government expenditure.
While presenting the budget, the Finance Minister had said, “Modernisation of the armed forces is critical to enable them to play their role effectively in the defence of India’s strategic interests.” However, the increase of Rs 25,328 crore in the allocation – partially neutralised by the high annual inflation rate that still hovers between 6 and 7 per cent, the steep fall in the value of the rupee against the US dollar vis-à-vis the traditional rise in the global prices of arms – was insufficient to give a major boost to the military modernisation that is necessary to meet the emerging threats and challenges.
The total revenue expenditure planned for 2014-15 was Rs 1,34,412 crore (approximately 60 per cent of the budget). This goes towards paying salaries and allowances and expenditure on ration, ammunition and transportation. The remaining amount of Rs 94,588 crore (40 per cent of the budget) was allotted on the capital account for the acquisition of modern weapon systems and equipment. Various consultancy firms have estimated that India will spend approximately US$ 100 billion over the 12th (2012-17) and 13th (2017-22) five-year defence plans on military modernisation.
As many as 14 strategic rail projects have been pending due to resource constraints. These shortcomings need to be made up quickly to avoid military embarrassment in a future conflict.
The Army has begun the raising of 17 Corps, designated as a mountain strike corps, which is expected to cost Rs 64,000 crore over seven years. Major acquisitions of weapon platforms that have been pending for long include initial payments for 126 multi-mission, medium-range combat aircraft (MMRCA), 197 light helicopters, 145 Ultra-light Howitzers, 15 Apache attack helicopters and 22 CH-47F Chinook medium lift helicopters, C-17 heavy-lift aircraft and frigates and submarines. The armed forces must also 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.
In a letter to Prime Minister Manmohan Singh in March 2012, the COAS, General V K Singh, now MoS, External Affairs, had pointed out the ‘critical hollowness’ of defence preparedness. Ever since the Kargil conflict in 1999, when 50,000 rounds of Bofors medium artillery ammunition had to be imported in a hurry from South Africa, the ammunition holdings of the Army have been reported to be too low to fight and win a sustained war. Many other deficiencies in the holdings of important weapons and equipment need to be made up.
While China has been engaged in rapidly implementing new rail, road and airfield projects in Tibet so as to reduce the deployment timings of the People’s Liberation Army (PLA) and enhance operational logistics, India’s development of infrastructure along the border with China has made relatively little progress. As many as 14 strategic rail projects have been pending due to resource constraints. These shortcomings need to be made up quickly to avoid military embarrassment in a future conflict.
The announcement made in the budget speech to raise the ceiling for FDI in joint ventures (JVs) for the manufacture of weapons and defence equipment from 26 to 49 per cent had fallen far short of the expectations of the defence MNCs. They would have preferred to have a majority stake of at least 51 per cent. That would have made investment in defence manufacture in India worthwhile for them.
…the Prime Minister said in the era of shrinking defence budgets India could become a global manufacturing and export hub for arms and defence equipment.
The Department of Industrial Policy and Promotion had proposed an increase in the FDI limit in the defence sector from 26 per cent to 49 per cent without the transfer of technology (ToT), up to 74 per cent with ToT, both with FIPB approval, and up to 100 per cent in the case of the transfer of state-of-the-art technologies with prior approval of the Union Cabinet. However, the Ministry of Defence, the defence PSUs and the CII and FICCI, the two powerful of chambers of commerce, had expressed their reservations on giving controlling interest to MNCs.
While inaugurating the biennial air show Aero-India 2015 at Bengaluru on February 18, Prime Minister Narendra Modi said he did not like the fact that India is the world’s largest importer of weapon systems. With the NDA government’s second budget approaching, the Prime Minister said in the era of shrinking defence budgets India could become a global manufacturing and export hub for arms and defence equipment.
The Prime Minister invited defence MNCs to join hands with Indian public and private sector companies to “make in India” and reiterated the government’s willingness to allow FDI in defence beyond the stipulated 49 per cent for projects involving the transfer of cutting-edge technologies. He pointed out that the reduction in dependence on defence imports from 70 to 40 per cent in five years would create 100,000 to 120,000 highly skilled jobs, boost investment, reduce costs and upgrade India’s manufacturing and system integration skills. In short, a gradual shift in the defence acquisition policy to manufacturing in India will provide huge economic benefits.
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Whatever happened to the much talked about LTIPP, that had set up very ambitious acquisition plans spread over 12-14th Def Plan from 2012-2027, without a supporting budgetary allocation in the three successive budgets. Successive budgets have maintained a dismal low of 1.7 to 1.8% of the GDP with a matching parity of 1962 era.
The raising of MSC (its employment/ utility being a subject of separate debate) @ projected cost of Rs. 62-64000 Crores alone sounds unacheivable at the budgetary allocation trend witnessed over the last two decades. It would not be grossly out of sync in assuming that there would be any exponential change in budgetary growth % GDP terms in the coming future.
That brings us back to where we started from. Better described in an urdu couplet:
Yeh jabr bhi dekha hai,
Tareeq ki nazron nein,
Lamhon nein qata ki thi,
Sadiyon ne sazaa paayi!!
Dear All,
If one could note to see that the actual expenditure of Defence forces has been around Rs. 200000 crores, comparing this with the current allocation it is a jump of around 20 %, which is not at all bad considering the overall economic conditions. Further, as there is a mammoth corruption in the forces also, Government might have planned something to handle this, to put the house in order. Increasing Budget every year is not the only solution to improve the quality of our forces… Make In India effort is yet to start… Sound diplomatic moves have fixed our tricky neighbours for a while and deeper, sensitive issues should not be sorted out in a rush.. Let us watch the moves more closely in the coming few months..
Let them utilize the funds allocated for capital acquisitions. If the judiciously and effectively utilise the fund for capital acquisitions and runs further short of funds, govt can very well provide fund during mid term appraisal. The major problem in capital acquisition in defence is procurement procedures that needs to be streamlined for quick and transparent decisions. As far as raising Mountain Strike Corps is concerned About Rs 64,000 crores would be required over a span of 6-7 years. This requires about 9,000 Crores annually, and in fact in initial stage amount of fund required will be less, which can be easily met with current and subsequent budget.
I don’t find any difference in the Congress and the BJP. The defence ministers of the congress and the BJP make similar statements. These are false and hollow statements to mislead the public. What is being written in various forums as to the state of the countrys armed forces; is of no consequence to the common public of this country. The Defence budget has to be broken up under various sub heads when being presented to the public. The first effort of the Government should be to make up the existing deficiencies in our inventory. Mainly related to the capability of waging war in terms of number days. To build up basic equipment of the Infantry soldier – the mainstay of any operation. Next is to have an integrated view of the requirements of the forces say till 2025. Here we should take measure to fast track the procurement/ manufacture of the required equipment. Build up the necessary infrastructure to manufacture in the country. We have no choice but to increase out defence spending – we shouldn’t be behaving like holy cows in front of the International community. In any case our antics don’t impress them. The budget is highly disappointing.
Marginal hike in the defence allocation of Rs 2.47 lakh crore in the new budget proposals will merely cushion inflation pressures during the fiscal. At 1.75% of the GDP our defence budgets have remained asymptotic over the last many years now while threats from across our borders and the vast coastlines have grown manifold.Are we alive to the growing expansionist designs and terror integrated military doctrines of our neighbours?If so our budget does not reflect our concerns.Then in the hope of incremental FDI in defence opening floodgates of newer technologies flowing in, we have toppled our own apple cart of defence research?DRDO has been headless now for a month-possibly many hats the previous heads wore-are being redistributed?In defence be it soldiers or second line or even supporting research and production-morale remains key factor. That brings us to the emotive issue of OROP which has been on the back burner for a long time. Computations of pensions and arrears are easily manageable by programming which is not rocket science? But then you require Kejriwals to redeem election promises even after landslide mandate.
Dear Sir,
There is a need for pragmatism among analysts about numbers and money allocations. One of the interesting aspect is that we are looking at modernization as a key to our future capability development?
Yet significantly no studies has been instituted at service’s level in an integrated framework of the defence capability India wants and for what purpose. In an interesting recent scenario exercise taking the 2020 profile into account fourth genertaion fighters outnumbered 1:3 vis a vis Pakistan. In similar vein what is the optimum number of submarines, tanks etc that country requires for fighting future wars and what will be there nature?
I am little surprised that senior and very learned defence analysts only talk of platforms with little recourse to systems development – no analysis is being done of what constitutes net centric warfare or space based systems, C4ISR are only terms bandied about without fully appreciating their meaning. It will be of interest to note that after years of modernization and tempting to achieve full spectrum capabilities it is no more than 30 -35% modern and able to field net-centric systems?
Lastly in terms of adequacy or otherwise of capital acquisition budget, MMRC deal, MT Aircraft, Chinooks if all bought will eat total modernization budget of all the three services for years. What we need to understand is capital acquisations of major programmes are amortised against initial payments based on efficacy of reaching conclusion to defence acquisition deals which in any case take a number of years in the “make India” mold?
best wishes