Pavan Srinath
India’s defence spending is marching backwards. Caught between a fiscal squeeze, ballooning pensions and a bloated armed forces, India is running out of options. The only escape is reform, reform, reform.
Last year, the Finance Minister Arun Jaitley did not mention defence at all in his budget speech. Here’s what he skipped mentioning:
Overall, the defence budget estimate for 2016–17 is Rs 3.4 trillion, about 10% more than the previous year’s budget estimate. This is broadly consistent with past increases.
However, what makes up this net increase is a radical departure from the past.
Thanks to OROP, the defence pensions budget has gone up by a whopping Rs 27,800 crore from the previous year — a full 50% increase. This increase is just Rs 2,000 crore short of the increase in the overall defence budget, making one wonder if all other expenditure increases have been frozen.
Last year, the government had allocated close to Rs 86,000 crore as capital outlay, and we learn now that this was revised down to Rs 74,300 crore. The latest budget estimate is Rs 78,586 crore on capital expenditure.
This year, one important line was mentioned.
“For defence expenditure excluding pensions, I have provided a sum of Rs2,74,114 crore including Rs86,488 crore for defence capital.” — Arun Jaitley
What was left unsaid, was that the defence budget dropped to its lowest in decades, even lower than last year, when you leave out defence pensions.
The first thing left unsaid was that the budget estimate of defence pensions this year is a whopping Rs 86,000 crore. When you include defence pensions, the overall defence budget amounts to Rs 3.59 trillion, or 2.1% of gross domestic product (GDP). When you exclude defence pensions, it drops to a meagre 1.6% of GDP — a drop from last year’s low of 1.74% of GDP.
The song remains the same on the capital acquisitions budget. As the government has done repeatedly, there was a 9% slash in last year’s revised estimate, compared to the budget estimate. This year, there is a nominal increase of 10% in the capital acquisitions budget over last year — but this is a net reduction in capital spending once you account for inflation and slashed expenditures in the revised estimate.
While Rs86,000 crore on capital acquisitions might sound like a large number, close to 90% of it is allocated to paying off instalments of money for past purchases of Sukhoi fighter craft, aircraft carrier Vikramaditya, transport planes like the C130J Super Hercules and more. The available budget for future acquisitions will be about Rs10,000 crore and no more.
The article also suggests a set of defence reforms, starting with a look at force optimisation, especially in the Indian Army.
The defence minister Manohar Parrikar mentioned this once, back in March 2015, soon after taking over.
Talking exclusively to TOI before he left for J&K and Siachen on Friday, defence minister Manohar Parrikar said there was “an urgent need for some downsizing in areas which are not of operational importance” due to budgetary constraints.
“The flab will be reviewed and removed… there is a requirement to re-think all aspects for a drawdown. The money saved can go towards the new mountain strike corps (MSC),” said Parrikar.
Which is confusing, given that he continues to bat for a new, unnecessary mountain strike corps.
In June 2016, Mr Parrikar set up a committee under Lt-Gen. DB Shekatkar (retd) “to suggest structural changes in the Army, the IAF and the Navy on cutting down flab and reducing revenue (maintenance) expenditure.”
However, the Shekatkar committee came back with a report in December 2016, with the following:
[The committee] has recommended to the government to not to reduce its “combat strength” at a time the country is facing hostility from Pakistan.
The sources stated that the committee had suggested reorientation of training facilities so as to save defence expenditure.
“These structural changes will help the government save about Rs10,000 to Rs15,000 crore,” a source said, adding that this savings should be utilized by the respective forces for its modernization.
This seems unfortunate and limited, although much cannot be determined because the report is not in the public domain, and there is no sign that it will be publicly shared soon. The defence ministry has set up yet another internal committee to see how to incorporate the suggestions of the Shekatkar committee report.
Committee or no, the Indian army has a million plus personnel, and it is at least a few hundred thousand too strong. The Indian army is better off with fewer soldiers whom it can care for better, and have them better equipped with weaponry to act as a potent deterrent force.
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