Military & Aerospace

Defence Budget far from Threat Perception
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Issue Net Edition | Date : 18 Mar , 2013

There is an overall decrease in the defence outlay of almost all countries in the world including India except China and Pakistan. According to the Stockholm International Peace Research Institute, China’s annual defence spending rose from over $30 billion in 2000 to almost $120 billion in 2010. The total military spending in 2012, based on the latest announcement from Beijing, is around $160 billion. Reduction in defence spending will be the main target for US’s deficit reduction programme for the next ten years — yet, US spends more than four times of that of China.

…it is wise to remember that the plan to modernise the Indian military was put on hold during the 1990s, which proved disastrous subsequently during Kargil operations.

India, vilified as the largest importer of weapons, is nowhere near China or the US — not only in spending but also in keeping up with the pace of technological developments. Its efforts at achieving taint-free acquisition, what with blacklisting of leading arms manufacturers and cancellation of contracts, have stalled the process of defence modernisation. Defence deals are mired in scams like the present deal with Augusta Westland, which is more about VVIP movement.

To some extent, the Finance Minister in his Budget allayed apprehensions by not ‘slashing’, but by allowing a modest increase of 14 per cent over revised estimates of Rs.178,503 crore, or 4.5 per cent over Budget estimates – the lowest increase in the last three years, at Rs 2,03,672 crore with Rs 86,741 crore for capital acquisition. Unfortunately, the allocation is not based on the threat perception of two-pronged offensive from China and Pakistan.

Mr Antony said that the government is drastically cutting down on expenditure across the board however, there will be no cuts in “priority areas” and the “operational preparedness” of the military will not be affected.

More importantly, revenue expenditure (day-to-day costs and salaries) stands at Rs 116,931 crore, surpassing by far the capital needed for new weapons, sensors and platforms at Rs 86,741 crore. It reflects a poor “teeth-to-tail” ratio. Also, a major chunk of capital outlay will go for “committed liabilities”, not leaving much for new projects. The finance ministry will once again step in towards end-December to slash the allocated Budget. In the going fiscal, the capital outlay was cut by Rs 10,000 crore, and revenue by Rs 4,904 crore.

…revenue expenditure (day-to-day costs and salaries) stands at Rs 116,931 crore, surpassing by far the capital needed for new weapons, sensors and platforms at Rs 86,741 crore.

What is disappointing, however, is the allocation for defence research remaining at around Rs 10,600 crore and plant and machinery expenditure at Rs 435 crore. This is not at all in keeping with the sentiments expressed in favour of rapid indigenisation of A K Antony. No other monetary incentive was also announced for increasing private sector participation in defence production.   The Finance Minister disposed of the requirements for defence in clichés uttered by every Finance Minister since the days of Chinese aggression: “constraints will not come in the way of providing any additional requirement for the security of the nation”.

The Defence Ministry is in a major modernisation process with several acquisitions in the pipeline besides upgradation of infrastructure in the northeast along with China border. It had last year demanded for Rs 40,000 crore more for meeting its modernisation requirements in addition to the Rs 1,93,407 crore but that could not be provided because of fiscal constraints.

The capital expenditure outlay of Rs 86,741 crore marks a hike of Rs 7,162 crore over last year’s budget estimates and Rs 17,162 over the revised estimates. Of this capital expenditure, Rs 33,776 crore will go for towards aircraft and aeroengine purchases for the three services of which Rs 25,539 crore will go to the Air Force alone. It will spend Rs 23,457 crore on other military equipment, apart from Rs 2,080 crore on heavy and medium vehicles. It will also utilise Rs 5,552 crore of its defence capital expenditure on research and development.

While the Air Force seem to be satisfied with the allocation, as it is expected to acquire 126 fighter jets besides 400 helicopters, artillery, drones and electronic warfare systems in the coming years. It has already signed contracts for 10 C-17 transport planes for $ 4.1 billion and upgrading 49 Mirage-2000 combat jets for $ 2.4 billion, both in 2011.

The capital expenditure outlay of Rs 86,741 crore marks a hike of Rs 7,162 crore over last year’s budget estimates…

However, the real worry in defence is the “critical operational requirements” of the Army which wanted over Rs 10 lakh crore for the 12th Plan (2012-17) period to acquire new capabilities and plug huge operational gaps in artillery, aviation, air defence, night-fighting, ATGMs (anti-tank guided missiles) and specialised tank and rifle ammunition. Moreover, a crucial project during the 12th Plan is to raise the new mountain strike corps, for “rapid reaction ground force capability” against China.

The Strike Corps for high altitude areas was to be raised over five years at a cost of Rs 60,000 crore. This has been scaled down to Rs 20,000 crore. There may be only a token allocation for this in the 2013-14 Budget, said the sources.

Difficult economic conditions notwithstanding, IHS Jane’s has predicted that India will become the world’s fourth-largest defence spender by 2020, just behind the U.S China and Russia. It will surpass France, the U.K. and Japan. According to IHS Jane, India’s defence spending will reach $65.4 billion in 2020.

Moreover, in the context of an increasingly assertive China, the budget will only widen the gap with India as it tries to cope with the Chinese military modernisation programme. Beijing’s military expenditure in real terms has grown by 620% between 1990 and 2011, while by contrast; India’s has grown by 152% only. Consequently, the gap between the two countries’ military spending which was almost negligible in 1990 has been widened by a factor of three in favour of Beijing.

In this context, it is wise to remember that the plan to modernise the Indian military was put on hold during the 1990s, which proved disastrous subsequently during Kargil operations. It was only in the later part of the 2000s that the renewed focus on modernisation helped the military to regain its operational punch after considerable effort.

The worry is the country’s budgeted defence expenditure now is just 1.79% of the projected GDP for 2013-2014 which is worse than the 1.9 per cent figure of 2012-13, a far cry from the stated goal of spending 3% of GDP on defence backed by the Parliamentary Committee on Defence and demanded by the armed forces and strategic experts for years to ensure requisite deterrence against both China and Pakistan.

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The views expressed are of the author and do not necessarily represent the opinions or policies of the Indian Defence Review.

About the Author

Col (Dr) PK Vasudeva

is author of World Trade Organisation: Implications for Indian Economy, Pearson Education and also a former Professor International Trade.

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