Defence Budget (2014-15): What it implies
No country can be militarily strong when 77 per cent defence requirements are met through imports. It is obvious that a priority of the new government would be to review the country’s budget including the defence budget, latter in relation to threats pose
Post the statement by the Prime Minister during the Unified Commanders Conference last October that the military should be prepared for a cut in the next defence budget, the announcement by the Finance Minister in the Parliament on February 17, 2013, of a 10 per cent hike in defence budget over the previous year caused much jubilation and thumping of tables in Parliament. A 10 per cent hike brings the figure to ` 2,24,000 crore which appears substantial at first look even it includes ` 500 crore of OROP (against some over ` 2,600 crore that was required to sanction OROP fully).
However, a closer examination reveals that the situation is not what it outwardly appears especially considering that the existing shortages of ammunition and equipment alone, discounting modernisation, is to the tune of ` 1,41,000 crore. During the current fiscal (2013-14), the defence budget allotted was 1.7 per cent of GDP – ` 2,03,672.12 crore. Of this, a major part was revenue budget with only ` 86,740.71 crore allotted for capital acquisitions. Most significantly, the Long-term Integrated Perspective Plan (LTIPP) for period 2012-27 that is already approved by the Defence Acquisition Council headed by the Defence Minister, as also the Twelfth Five Year Plan, was based on a defence budget allocation at three per cent of the GDP.
Therefore, the defence budgets in the last and current fiscals at 1.6 per cent and 1.7 per cent of GDP by themselves were inadequate.
Despite austerity measures imposed by the military, worsening of the economy, particularly depreciation of the rupee has affected defence modernisation. Desperate measures to increase foreign direct investment (FDI) in defence has not paid out either because of acquisition and defence procurement policy that is not found attractive by foreign firms due to uncertainties and the time factor. In the current fiscal, the increased running expenditure of the military (due to depreciation of the rupee) forced transfer of ` 7,870 crore from capital budget. This had to be resorted to despite austerity measures like even cutting down the fuel for warming at the frozen frontiers in the thick of winter.
Presently, large orders are pending for modernisation (with 90 to 95 per cent committed liabilities) that require huge capital expenditure even though the Defence Minister has hinted that there is no money likely to be available for the acquisition process of Rafale aircraft to commence to meet the medium multi-role combat aircraft (MMRCA). So, forget cushion for new schemes, costs of approved acquisitions too will likely go up sharply with time overruns. Raising of the Mountain Strike Corps itself will entail an yearly expenditure of ` 7,000-`10,000 crore for next seven years, in addition to about an overall ` 25,000 crore required for infrastructure to support the Mountain Strike Corps.
Even though the Rafale acquisition is delayed, major acquisitions like attack and heavy-lift helicopters, light artillery helicopters and technology agreement for the fifth-generation fighter aircraft, and other approved procurements will need to be progressed. Though the Defence Minister has said that we are not modernising our military in relation to any other country but that is more in line with political etiquette. However, China-Pakistan collusion and the two-and-a-half front threat can hardly be ignored. It goes without saying that the 10 per cent hike in defence budget does not match the LTIPP and the military will be forced to exercise more austerity and prioritise what acquisitions are possible with the money in hand.
Kanwal Sibal, former Foreign Secretary, wrote in his article, ‘Adrift Without a Strategic Culture’, published March 12, 2013, “Our failure to build an indigenous defence manufacturing base shows the fragility of our strategic thinking. We have reduced our defence expenditure to 1.7 per cent of GDP in the last budget….That we produced Chanakya almost 2,400 years ago is not sufficient ground to claim that today’s India possesses a strategic culture.” The new government, therefore, must work overtime to give a boost to the indigenous defence industrial.
No country can be militarily strong when 77 per cent defence requirements are met through imports. It is obvious that a priority of the new government would be to review the country’s budget including the defence budget, latter in relation to threats posed to the nation’s security. There is definite need to make more money available for modernisation of the military. In Pakistan, pensions of military veterans are paid through respective State Governments and not through the defence budget. Such measures need to be adopted by us considering some 60,000 personnel retire annually from the army alone and the snowballing effect adds to reduction of meager allotments of the defence budget. The views expressed herein are the personal views of the author.
LT GENERAL (RETD) P.C. KATOCH