Keeping Us Out of Arms’ Way
India’s budgetary allocation for defence is sizeable: .₹ 3,40,000 crore in the last fiscal year. But it receives relatively little notice or review, which is symptomatic of matters military in India.
Devoid of the pension outlay, the total defence budget for 2016-17 was .₹ 2,49,000 crore, which is the budget estimate (BE). Today, the finance minister will indicate how much of this budgeted amount was actually spent in 2016-17. This amount is the revised estimate (RE).
The trend for the last two years running has been that the RE has been less than the BE, and the utilisation of the defence budget in 2014-15 and 2015-16 was 95% and 91% respectively.
The second indicator is that over the last three years, BE to BE, the increase in the defence budget from 2014-15 to the current fiscal year as a percentage of the previous year has been reducing from 12.4% to 7.7% to just 1% last year. In actual terms, the defence allocation over the last three years has been .₹ 2,29,000 crore, .₹ 2,46,727 crore and .₹ 2,49,099 crore.
In other words, despite a glaring inventory deficiency for the three armed forces, India’s higher national security management has not allocated the necessary funds required. Or worse, has not utilised the amount budgeted in an effective manner.
One more trend indicator provides the overall contextual framework for India’s defence budget allocation while also illustrating the priority accorded to this sector in the larger national fiscal grid. Over the last eight years, from 2009-10 onwards, the defence expenditure (minus pensions) as a percentage of GDP has steadily declined from 2.19% to 1.65%.
So, over the last three years, the ministry of defence has been unable to utilise the funds allocated; the increase from year to year is declining, as also the total allocation in relation to GDP. This is a macro-trend indicator that does not augur well for the kind of challenges the Indian military faces over the next decade.
Accumulated obsolescence is the major challenge for India’s ageing military inventory. Perhaps this year’s Republic Day parade offers the most stark indicator. The United Arab Emirates (UAE) contingent led the parade as guests of honour. The manner in which it was kitted and equipped — including personal weapons — was a study in contrast with our contingent.
Suffice it to note that the average Indian infantry soldier is technologically one generation behind his counterpart in the spectrum of modern armies globally.
The management challenge apropos defence allocations gets even more muddled when the capital outlay is disaggregated. This head pertains to the acquisition of new equipment and platforms. The track record of the last year is below the median.
The BE for the capital head in 201516 was .₹ 98,175 crore and the RE — the amount actually spent — .₹ 85,112 crore. That is, about .₹ 13,000 crore (almost $2 billion) was unspent. This, when the Modi government has prioritised military modernisation and ‘Make in India’.
Very often, large sums of money are (mis)appropriated from the ministry of defence in the last lap of the financial year to balance the books, as it were, and to keep the deficit down. One was witness to this last-minute political pressure during the NDA1period when the thendefence minister George Fernandes was prevailed upon by his counterpart in North Block to return .₹ 8,000 crore as unspent.
It will be instructive to note what Arun Jaitley will announce today — and the degree to which these trends have been corrected. Hopefully, the last phase of this government will see a transition from arid expenditure control to more productive capacity creation in the armed forces.
The writer is director, Society for Policy Studies
We need something a bit more… modern