Chinese Adventurism Demands Speedy Modernisation
The defence budget, for Financial Year 2021-22, including outlay for payment of pensions, was increased to Rs 4.78 lakh crore for 2021-22 as against last year’s Rs 4.71 lakh crore – a marginal hike of 1.48%. Excluding the pension outgo, the allocation in the Union Budget for the armed forces stood at Rs 3.62 lakh crore. Excluding defence pensions, the hike was about 7.34%.
Capital Outlay
The allocation under Capital of Rs 1,35,060.72 crore for FY 2021-22 is the highest ever increase in capital outlay of Defence in the last 15 years. Last year, the capital outlay was Rs 1.13 lakh crore. The allocation under capital expenditure which relates to modernisation and infrastructure development of Armed Forces has been significantly increased. represents an increase of 18.75 per cent over Budget Estimates (BE) FY 2020-21 and 30.62 per cent over FY 2019-20.
Army. In the budget, the Army has been granted a capital outlay of `36,481 crore as against `33,213 crore in 2020-21, as per the revised estimates.
Navy. The allocation made to the Navy for capital expenditure is `33,253 crore which was `37,542 crore in the previous budget.
Indian Air Force. Similarly, the IAF has been given Rs 53,214 crore to buy new platforms and weapons which is a drop of Rs 1,840 crore compared to the money it spent under capital expenditure in the current fiscal. The budgetary capital outlay for the IAF for 2020-21 was Rs 43,281.91 crore but the revised estimate put the figure at Rs 55,055 crore.
DRDO. The capital allocation for the Defence Research and Development Organisation (DRDO) has been pegged at ?11,375 crore which is an increase of 8% over the amount earmarked in 2020-21.
Revenue Expenditure
The total revenue expenditure, which includes expenses on payment of salaries and maintenance of establishments, has been pegged at Rs 3.37 lakh crore. The total revenue expenditure included Rs 1.15 lakh crore for payment of pensions.
Allocation under Non-Salary Revenue to meet operational requirement has been increased to Rs 54,624.67 crore. This is 6 per cent growth over FY 2020-21.
Pensions
The defence pensions saw a significant dip from Rs 1.34 lakh crore in Budget Estimate last year to Rs 1.25 lakh crore in Revised Estimates and further to Rs 1.15 lakh crore allocated this year. From BE 2020-21 to BE 2021-22 this represents a decrease of Rs 17,775 crore or about 13.4%.
Last year it was more because approximately Rs 18,000 crore was to be paid on account of pension arrears. Also salary and pension are based on actuals.
Emergency Allocations
Budget data also shows that the armed forces got an additional allocation of `20,776 crore under capital expenditure last year for emergency procurements in the face of massive mobilisation along the Line of Actual Control (LAC).
In January 2021, Army Chief Gen. Manoj Naravane had said that, in 2020, 38 deals were made through ’emergency and fast track’ route worth about `5,000 crore and in addition capital procurements worth `13,000 crore were also concluded. The procurements included light machine guns, light special vehicles and protective gear for infantry, infantry combat vehicles for mechanised infantry and long range vectors for artillery and also equipment for Engineers and Signals regiments.
DRDO
The capital allocation for DRDO has been increased to Rs 11,375.50 crore, an increase of 8% over 2020-21, the Ministry said.
Despite the increase, indigenization efforts for large projects (like Tejas, Rustom UAVs, Arjun Tanks) through DRDO Labs have often been adversely impacted by various Transfer-of-Technology (ToT) shortcomings. Lack of acknowledgement of limited indigenization capabilities (be it private agencies, DRDO or OFBs) for defence has impacted the Armed Forces’ preparedness. Dovetailing defencemodernisation with these organisations may only leave the defence forces wanting.
Percentage of GDP
Despite a nominal year-on-year growth rate, the defence budget appears to be somewhat underwhelming when viewed as a proportion of India’s Gross Domestic Product (GDP), but over the last few years, India’s defence budget as a proportion of its GDP has been on a decline. The Defence budget comes to around 1.63% of the GDP.
The 15th Finance Commission observed it its report that the expenditure on defence services as a proportion of GDP declined from 2% in 2011-12 to 1.5% in 2018-19 and to 1.4% in BE 2020-21.
According to last year’s figures, the overall defence budget was just 2.1% of the then estimated GDP. This was the lowest figure since the early 1960s.
Military experts believe that India should allocate at least 2.5% of its GDP to defence expenditure for building requisite deterrence against China and Pakistan.
Border Roads Organisation
The allocation for Border Roads Organisation (BRO) has been increased to `6,004 crore which is 7.48% more than the amount given in 2021-22.
Indigenization in Defence
The indigenization in defence even with buzzwords like Atmanirbhar Bharat or Self-reliant India in Defence has not shown the leap forward required to support the defence forces. The Negative List for imports published by the defence ministry in August 2020, was in any case simply the list which was on the anvil for indigenization by defence forces for the last decade or so. Overall, this highlights the lack of vibrant defence equipment manufacturing within India. Surely, the Defence Procurement Procedures encourages induction of well proven and mature equipment for purchase after their due tests and trials.
NDA vs UPA Governments
As a proportion of the total budget expenditure, India’s defence spending was the highest in 2000-01 under the then Atal Bihari Vajpayee government at 16.73%.
The Manmohan Singh-led UPA government began its term by setting aside a handsome chunk for the armed forces in its first couple of years. But the proportionate spending fell to an average of 13% in its later years.
Similarly, the Narendra Modi government set aside an average of 12% of the total budget for defence in its initial years. However, the proportion fell to 11.62% in 2018 and then further to 10.96% in 2019, the lowest in the last two decades.
In 2020, the spending picked up again when the defence ministry was allocated the highest sum among all the other sectors at 15.5% of the total budget expenditure.
India vs The World
With a steady increase in its defence allocation, India became the third-largest military spender in the world for the very first time in 2019.
According to data released by global think-tank Stockholm International Peace Research Institute (SIPRI), India surpassed Russia with a military expenditure of $91.1 billion in 2019.
However, it still lagged way behind US and China – the top two military spenders. The US spends more than 10 times and China almost four times India’s defence budget.
SIPRI had said that China’s military expenditure reached $261 billion in 2019, a 5.1% increase compared with 2018, while India’s grew by 6.8% to $71.1 billion.
“India’s tensions and rivalry with both Pakistan and China are among the major drivers for its increased military spending,” the report had said.
Measures to Reduce Revenue Expenditure
There is an urgent need to increase the capital outlay and somehow reduce the revenue expenditure. Some of the measures which are being contemplated are:
• A proposal to increase of retirement age in selected categories is under consideration. This will, in time, effect reduction in the revenue budget.
• A long standing demand of the armed forces has been that since a soldier retires early, there is merit in lateral absorption of a soldier in other departments or forces. This will ameliorate the burden of pension bill, besides providing disciplined and trained manpower.
• Right sizing of the armed forces is a bold exercise that has been undertaken by the defence forces themselves. Owing to ongoing integration of Army, Navy and Air Force, and raising other structures, this may take some time but will eventually scale down the revenue expenditure.
• Leasing, rather than outright purchase which has recently been permitted for defence platforms is a step in the right direction.
• A new entry scheme for officers called tour of duty is under consideration. This will not only reduce the revenue expenditure in salaries as well as pensions but also attract better talent for shorter duration.
• There is merit in examining smart financial engagement models other than outright purchase of everything. For instance, the transportation requirements in other than operational areas can be out sourced, as can several other logistic services.
Monetisation of some selected parcels of land (not A1 land under the Army in which cantonments and military stations are housed) should be considered. There is land under the Defence Estates which is outside the cantonments and away, including grazing grounds etc. Some of these are being encroached. Judiciously selected, some of them can form part of this drive to modernise the armed forces.
Defence PSUs and ordnance factory have huge potential to generate revenue as well as enhance their outputs by opting for joint ventures with private sector.
Comments
Overall, the Budget did not bring in the focus towards bringing new technologies to replace the manpower for defensive and other ISR activities. The lack of netcentric warfare technology as required to be implemented for the Theatre Level Commands may leave the modernization of the Armed Forces at a snails’ pace. Defence cannot be tied down by progress of the local industry to produce the military equipment and such an option can be detrimental on the Armed Forces’ edge to effectively handle rapidly modernizing adversaries like China.
In the backdrop of China’s adventurism in Ladakh, it was widely expected that the defence budget would be enhanced this year. In absolute terms, the increase has not been significant, barely enough to cover inflation.
This year, however, the defence sector is eyeing a generous capital infusion amid a heightened need to strengthen the military infrastructure in view of the ongoing border conflict with China. Under the Covid-19 overhang there are competing demands, with a huge focus on healthcare as a prime and universal concern, and it should be easy to understand why the government would not be able allocate more for defence needs.
