A Re­al­ity Check

The Union Bud­get 2012-13, pre­sented to the Par­lia­ment on March 16, 2012, has in­creased the de­fence bud­get to 1,93,407.29 crore. How­ever, the ac­tual in­crease is only 13.5 per cent if the fig­ures of the re­vised es­ti­mates are taken into con­sid­er­a­tion for the

SP's LandForces - - FRONT PAGE - LT GEN­ERAL (RETD) V.K. KAPOOR

BUILD­ING A MIL­I­TARY CA­PA­BIL­ITY is a long-term ex­er­cise. In the In­dian con­text, it in­volves for­mu­la­tion of the 15-year-long-term in­te­grated per­spec­tive plan (LTIPP) by Head­quar­ters In­te­grated De­fence Staff in con­sul­ta­tion with the Ser­vice Head­quartes (Army, Navy and Air Force). The five years cap­i­tal ac­qui­si­tion plan and the an­nual ac­qui­si­tion plans are de­rived from the LTIPP and form the ba­sis of work­ing out the cap­i­tal bud­get for all ma­jor pro­cure­ments dur­ing a year. The cap­i­tal bud­get re­quire­ment of each ser­vice added to the rev­enue bud­get con­sti­tutes their over­all bud­get de­mand dur­ing the year.

The se­cu­rity threats and chal­lenges fac­ing In­dia have in­creased enor­mously. While the old ad­ver­sar­ial threats due to un­re­solved bor­ders re­main, new threats and chal­lenges like ter­ror­ism and in­sur­gen­cies have been added to the old in­ven­tory. Thus In­dia needs to pre­pare it­self for the full spec­trum of war­fare rang­ing from low-in­ten­sity con­flict in­volv­ing counter-in­sur­gency and counter-ter­ror­ist op­er­a­tions to con­ven­tional con­flicts un­der the nu­clear shadow on two widely sep­a­rated fronts on its western and eastern flanks. The dilemma is only re­gard­ing the ex­tent of em­pha­sis that should be laid to ac­quir­ing each type of ca­pa­bil­ity. Thus the re­quire­ments of the ser­vices are vast and wide-rang­ing.

The Union Bud­get 2012-13, pre­sented to the Par­lia­ment on March 16, 2012, has in­creased the de­fence bud­get to 1,93,407.29 crore ($38.68 bil­lion). This rep­re­sents a growth of 17.63 per cent over the pre­vi­ous year’s bud­get. Af­ter 2009-10, when the bud­get was in­creased by 34 per cent due to the heavy in­crease in rev­enue ex­pen­di­ture caused by the rec­om­men­da­tions of the Sixth Cen­tral Pay Com­mis­sion, it is this year’s de­fence bud­get which has wit­nessed the high­est in­crease in re­cent years.

Lax­man Be­hera, the well-known an­a­lyst of the In­sti­tute for De­fence Stud­ies and Analy­ses (IDSA) who in­vari­ably gives a de­tailed anal­y­sis of each year’s de­fence bud­get has the fol­low­ing to say re­gard­ing the rea­sons for the in­crease: “The new de­fence bud­get comes at a time when the per­for­mance of the In­dian econ­omy is un­der stress and the prospect of re­cov­ery is ten­u­ous. As the Eco­nomic Sur­vey 2011-12, pre­sented to the Par­lia­ment a day be­fore the Union Bud­get puts it, GDP growth is pro­jected at 6.9 per cent in the present fis­cal year and at 7.6 per cent in 2012-13. These growth rates, which are sig­nif­i­cantly lower es­pe­cially in com­par­i­son to the nearly 10 per cent growth reg­is­tered in 2006-07, has how­ever not forced the gov­ern­ment to tighten its purse. In­stead, it has re­sorted to what can be termed as fis­cal profli­gacy, by in­creas­ing the over­all Cen­tral Gov­ern­ment ex­pen­di­ture by a hefty 18.54 per cent, with lit­tle re­gard for the fis­cal sit­u­a­tion. Con­se­quently, the fis­cal deficit, which the Fi­nance Min­is­ter had promised in his pre­vi­ous bud­get speech to be re­duced to 4.1 per cent of GDP in 2012-13, is now pro­jected to in­crease to 5.1 per cent. This ex­pan­sion­ary fis­cal pol­icy has been the prime mover for the large in­crease in the bud­get of the De­fence Min­istry, which would oth­er­wise have come un­der se­vere bud­getary pres­sure if the Fi­nance Min­is­ter had cho­sen a tight bud­get.

The in­crease in the de­fence bud­get has been shown as about 17.63 per cent. How- ever, the ac­tual in­crease is only 13.5 per cent if the fig­ures of the re­vised es­ti­mates (RE) are taken into con­sid­er­a­tion for the year 201112. The up­ward re­vi­sion from RE stage of 2011-12 to bud­get es­ti­mates (BE) stage of 2012-13 of the rev­enue bud­get amounts to 9,036 crore and of the cap­i­tal bud­get is 13,435 crore, thus bring­ing the to­tal in­crease in de­fence bud­get from RE stage of the con­clud­ing year to the BE stage of 201213 to 22,471 crore. How­ever, if the fig­ures of the BE stage of the con­clud­ing year to BE stage of 2012-13 are taken, the in­crease is

28,993 crore. There­fore, the ac­tual in­crease from the RE stage is only 13.5 per cent.

The in­crease in the de­fence bud­get is mis­lead­ing if one does not see the finer print and un­der­stand the to­tal­ity of the im­pact on var­i­ous as­pects of the bud­get. It can be broadly con­cluded from the fig­ures (see ta­ble) that while the share of the de­fence bud­get in the GDP has marginally in­creased, its share in Cen­tral Gov­ern­ment ex­pen­di­ture has fallen. More­over what is quite ev­i­dent is the fact that in com­par­i­son to the cap­i­tal ex­pen­di­ture, the rev­enue ex­pen­di­ture has in­creased faster. The growth of the de­fence bud­get has been driven pri­mar­ily be­cause of the in­crease in pay and al­lowance of the armed forces, which has in­creased by 27 per cent to 63,182.46 crore, ac­count­ing for around 46 per cent growth of the to­tal de­fence bud­get.

Ser­vice-wise Share in the Bud­get

The Army with an ap­prox­i­mate bud­get of 97,302.54 ac­counts for 50 per cent of the lat­est de­fence bud­get, fol­lowed by the Air Force (`48,191.16; 25 per cent), Navy (`37,314.44; 19 per cent), the De­fence Re­search and De­vel­op­ment Or­gan­i­sa­tion (`10,635.56 crore; six per cent) and ord­nance fac­to­ries (`135.13 crore). It is note­wor­thy that com­pared to the pre­vi­ous year’s bud­get, Navy is the only ser­vice which has an in­creased share in its to­tal de­fence al­lo­ca­tion (from 15 to 19 per cent). The Air Force’s share has de­creased the most (by four per­cent­age points), whereas the Army’s share has de­clined by one per­cent­age point.

How Does it Im­pact Mod­erni­sa­tion

The cap­i­tal bud­get shows an in­crease of 15 per cent with an ad­di­tional amount of

10,379.82 crore. Cap­i­tal bud­get is mainly meant for new pro­cure­ments for mod­erni­sa­tion of the armed forces. So let us ex­am­ine how it im­pacts each ser­vice. The three ser­vices (Army, Navy and Air Force) ac­count for 94 per cent (`74,439.95 crore) of to­tal cap­i­tal bud­get in 2012-13. Air Force has the max­i­mum share of 38 per cent (`30,485.35 crore), fol­lowed by the Navy (31 per cent or 24,766.42 crore) and the Army (24 per cent or 19,188.18 crore). Of the to­tal cap­i­tal bud­get of the three ser­vices, around 89 per cent (`66,459.43 crore) is ear­marked for cap­i­tal ac­qui­si­tion or mod­erni­sa­tion. These im­pres­sive fig­ures are how­ever mis­lead­ing. A closer look at the growth of the mod­erni­sa­tion bud­get of 2012-13 re­veals that the fo­cus is en­tirely driven by the Navy, which has got a 72 per cent hike (to 24,151.51 crore) in its mod­erni­sa­tion bud­get. The Air Force’s mod­erni­sa­tion bud­get has in­creased marginally (by 0.5 per cent) to 8,503.9 crore, while the Army’s cap­i­tal bud­get has de­clined by three per cent to 13,804.02 crore. The in­signif­i­cant in­crease in the Air Force’s mod­erni­sa­tion bud­get and the de­crease in the Army’s bud­get do not au­gur well for these two ser­vices and do not meet their mod­erni­sa­tion goals.

It seems that the Army Chief has al­ready ap­prised De­fence Min­is­ter A.K. Antony that de­lays in de­ci­sions on key mil­i­tary mat­ters have blunted the op­er­a­tional edge of the Army. The sit­u­a­tion is quite alarm­ing. The Army Chief ’s let­ter high­lights de­lay in set­ting up the na­tional counter-in­sur­gency school, short­fall of qual­ity am­mu­ni­tion and ord­nance, lack of po­tent cy­ber war­fare units, fail­ure to mod­ernise T-72 bat­tle tanks, de­lay in upgra­da­tion of Ar­jun main bat­tle tanks (MBTs), lack of mod­erni­sa­tion in ar­tillery and air de­fence ca­pa­bil­i­ties and de­lay in pro­cure­ment of in­fantry weapons and re­con­nais­sance and sur­veil­lance he­li­copters.

As far as the IAF is con­cerned, the big ticket items in the pipe­line in­clude air­craft such as the Rafale fighter air­craft; Apache at­tack he­li­copters, and heavy trans­port air­craft (C-17 Globe­mas­ter III). Thus we can ill af­ford the stag­na­tion or re­duc­tion in the cap­i­tal bud­get of the Army and the Air Force at this junc­ture.

The above ob­ser­va­tion should be seen in light of the fact that 3,055 crore (4.41 per cent) of the cap­i­tal bud­get has been sur­ren­dered at the time of re­vised es­ti­mate of 2011-12.

Fi­nance Min­is­ter Pranab Mukher­jee

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