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
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