Indian Defence Review

Indian Armed Forces were expecting a huge jump in the defence budget during the Modi Government’s third budget announced on February 29, 2016. The nation is experiencing positive economic growth of 7.6 per cent of the GDP; declining oil prices, low inflation, cash flows from coal, spectrum auctions and $350 billion balance of payments. The Make in India campaign, with an emphasis on defence, has been launched.

The external realities are that China is rapidly becoming a superpower with accelerated indigenous defence production. It is developing infrastructure on the borders and flexing muscles in the South China Sea. Growing Sino-Pak defence cooperation is worrying. Pakistan’s continued military-terrorist nexus is hitting India where it hurts. The Pathankot IAF base attack is a recent example of its increased terrorism threat. Despite such security and economic background, finance minister Arun Jaitley made no mention of India’s defence allocation for 2016-17 in his Union Budget speech, breaking from the tradition in more than 15 years.

India announced its defence budget outlay for the financial year 2016-17 to be Rs2.58 lakh in the annual budget laid down in Parliament. While this amounts to a meagre hike of 1.16 percent on the basis of the budget estimates of 2015-16, but on being calculated against the revised estimates of the last fiscal which was Rs2.33 lakh crore, it comes around an increase of 9.76 percent.

The capital expenditure outlay for the defence services has been put at Rs78,586 crore as compared to the last year of Rs 86,894 crore. Even as the revised estimate for last financial year showed unused fund of Rs11,595 crore, another Rs 6,700 crore of the expenditure budget remained unspent.

Another Rs82,000 crore was allocated towards pension funds that go mainly for the beneficiaries of the One Rank One Pension scheme, notified in last fiscal. An amount of Rs 60,238 crore was the revised estimate under pensions, last financial year. Adding the pension funds makes the total defence budget accounting for 2.2 percent of India’s Gross Domestic Product (GDP) that still lags by 0.8 percent for India to be able to take on China militarily. A significant portion of that amount, 60 per cent, is already committed to paying for weapon systems and military platforms bought by the defence services earlier.

The actual allocation less the pension amount for the next year is only 1.71 per cent of the GDP, perhaps the lowest since the 1962 India-China war, which is far lower than the 3 per cent of GDP recommended by the Parliamentary Standing Committee on Defence in its reports spanning a decade.

The yardstick of 3 per cent of GDP is important because the defence services formulate their Long Term Integrated Perspective Plan (LTIPP), which prioritises their procurement over the next 15 years based on that yardstick. Continued shortfall in defence allocation by that yardstick means that the gaps in defence modernization widen with every passing year. While the desirable equipment profile of the armed forces, as per the defence secretary’s testimony to Parliamentary Standing Committee last year, is 30:40:30 (30 per cent state-of-the-art, 40 per cent current and 30 per cent nearing obsolescence), experts estimate the current profile to be 15:45:40. Any more deterioration of the profile – an inevitability considering the budgetary allocation — will constrain the defence services from fulfilling their primarily role of defending the country.

The Centre plans to focus defence spending more on the domestic market instead of importing fighter planes; ships and submarines, after saying it will leave military spending for 2016-17 largely unchanged following years of increases.

In recent years, India has emerged as the one of the top arms importers in the world. Major global defence companies have been circling over the Indian market, buoyed by the military’s modernisation plans worth more than $100 billion. Prime Minister Narendra Modi’s government has vowed to end the military’s dependence on imports.

India’s military is deployed on the border with China as well as Pakistan and says it has to plan for a “collusive threat” from them both. For decades it relied on the former Soviet Union to supply planes, ships and artillery. Then it turned to Western manufacturers including France, United Kingdom and in recent years Israel and the United States for expensive combat planes, missiles and surveillance planes.

Amit Cowshish, who handled defence accounting in the ministry, said more than funds, the bigger problem was lack of clarity on the defence procurement policy. “It’s not that the money is not there, it’s that there’s no still no clear-cut policy on indigenous manufacture, the procedures etc. That is why even the money that has been allocated ends up not being spent.”

At 886.9 billion Yuan ($136.4 billion), China’s budgeted defence spending last year was more than thrice that of India’s defence expenditure of $38.2 billion, which is just 26 per cent of China. Next month its defence outlay is likely to be $144.5 billion.

India is in the process of purchasing – IAF’s 36 Rafale, 6 Airbus aerial refuellers, 15 Boeing heavy-lift Chinook helicopters, 22 Apache Attack helicopters, additional SU-30 MKI and additional C-17s and C-130s require funds. Fifth Generation Fighter Aircraft (FGFA) is facing cost escalations. LCA needs funding and so do Avro replacement and the Light Utility Helicopter. IAF is short of 500 pilots and needs an Intermediate Jet Trainer (IJT) immediately. After Pathankot, IAF must beef-up airfield security. IAF today is at an all-time low of 33 combat squadrons vis-à-vis the authorised 42. Due to delays in Light Combat Aircraft (LCA) ‘Tejas’ and in Rafale contract, and to prevent further down slide, phase out of older MiG-21 variants have been delayed at the cost of safety.

China has over double the number of combat aircraft than India. IAFs edge over PAF is at an all-time low of 1.5:1. Capital requirements for IAF itself could be Rs 50,000 crore. Indian Army needs money for Russian T-90 MBTs and indigenous Arjun battle tanks, Kamov 226 Light Utility helicopters, BrahMos tactical cruise missiles, 155 mm wheeled self-propelled guns, Ultra-light howitzers, and modern kits and assault rifles for its soldiers among many other things.

The Blue water Indian Navy needs to fast-track submarine acquisitions, including Arihant class nuclear subs and funds for already under construction Vikrant aircraft carrier. The 12 Japanese Shin Maywa Industries’ US-2i amphibious aircraft need around $1.65 billion. By 2019, the Navy dreams of having 150 ships and close to 500 aircraft and helicopters. The build up of India’s military strength has not kept pace with the increasing threat. Surprisingly, where are the funds?

The defence budget may seem high in numbers, but a large portion is committed to pay and pensions. There is little money available to buy new weapons, and even among that money is already committed to equipment in the pipeline. This puts a serious question of how to match threat perception from our neighbours. The Parliament must debate the national security issues in the Parliament and give priority to defence modernisation lest it becomes too late.