Jaitley’s Defence Budget Grossly Inadequate to Modernise the Army

A scant defence Budget will not allow our Army to modernise, even as Chinese Army is modernising at brisk pace.

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Given the continuously increasing threats and challenges to national security, particularly the possibility of a two-front war, the funds earmarked by the Finance Minister for defence expenditure for Financial Year (FY) 2018-19 are grossly inadequate.

The defence Budget proposed in the Budget speech on 1 February 2018 for the next financial year will neither enable the armed forces to achieve the required levels of defence preparedness, nor permit them to undertake the military modernisation that is necessary to acquire the desired combat capabilities.

A Nominal Increase in Defence Budget

Rs 2,95,511.41 crore

Total sum earmarked as budgetary estimates (BE) for FY 2018-19 (excluding pensions), according to a statement issued by the Ministry of Defence (MoD).

This amount is 7.81 percent more than the BE for FY 2017-18 (Rs 2,74,114.12 crore) and 5.91 percent more than the revised estimates (RE) for the year (Rs 2,79,003.85 crore).

Leave aside modernisation, the nominal increase is unlikely to contribute even towards compensating for the shortages in ammunition and equipment as it is barely sufficient to allow for the annual rate of inflation.

Other budgetary parameters too show a downward trend. The allocation of Rs 2,95, 511.41 crore for FY 2018-19 is 1.57 percent of India’s projected GDP for the year. It is projected to be approximately 1.60 percent of the GDP for FY 2017-18 and was 1.65 percent in FY 2016-17.

At its peak, during the 1980s, the defence budget was 3.5 percent of the GDP; since then there has been a steady decline.

Among Lowest Defence Budgets in the World

No matter which yardstick India’s defence expenditure is measured by, it is among the lowest in the world.

12.10 percent 

Share of defence Budget as a ratio of the Total Central Government Expenditure (TGE) for FY 2018-19.

In Pakistan, this figure is 25-30 percent of the TGE. While India has 1.25 soldiers per 1,000 people, China has 2.23 and Pakistan 4.25.

The ratio of capital to revenue expenditure is also far from the ideal of 50:50.

Capital expenditure

That which is incurred on new acquisitions for modernisation & replacement of obsolete weapons & equipment, plus land & buildings. 

Revenue expenditure

This is for expenditure on salaries, ammunition, transportation, clothing and maintenance, et al.

Of the defence budget of Rs 2,95,511.41 crore for FY 2018-19, Rs 99,563.86 crore (33.7 percent) is for capital and Rs 1,95,947.55 crore (67.3 percent) is for revenue expenditure. Manpower costs take away a large chunk of the defence Budget.

As the army is manpower-intensive (1.2 million personnel), its capital to revenue expenditure ratio is as low as 17:83.

Downside of Low Capital Budgets in Defence

What is the net effect of consistently low capital Budgets in defence?

Obsolescent vintage weapons and equipment in service are degrading combat efficiency and no modernisation is taking place, particularly in the army. The worst impact is the inability to acquire precision guided munitions and to modernise the command and control and intelligence, surveillance and reconnaissance systems of the armed forces, even as the three wings of the People’s Liberation Army of China are modernising at a brisk pace.

The pension bill for the ensuing financial year (Rs 1,08,853.30 crore) is projected to rise by 26.60 percent over FY 2017-18 (Rs 85,740 crore, BE). This is more than the capital expenditure planned for the year.

Surely, urgent steps need to be taken to adopt innovative measures to reduce the costs of manpower in the armed forces even if the number of personnel in uniform cannot be drastically reduced immediately due to manpower-intensive deployments on the Line of Control (LoC) with Pakistan, and the Line of Actual Control (LAC) with China, as well as for counter-insurgency operations in Jammu and Kashmir (J&K) and many of the Northeastern states.

Brighter Side of Defence Budget 2018-19

What are the benefits for defence sector as gauged from Finance Minister’s Budget Speech?

In his Budget speech, Finance Minister Arun Jaitley announced the completion of the Rohtang Pass tunnel that will provide an all-weather route to Ladakh, expressed the government’s satisfaction on the progress of work on the Zojila Pass (J&K) tunnel and declared the government’s intention to construct a tunnel under Sela Pass (Arunachal Pradesh). He also said that the government will establish two military-industrial corridors to give a boost to indigenisation. The defence minister later said that the first of these is likely to come up in the Tamil Nadu-Karnataka area.

Self-Reliance in Defence Acquisition a Must

Finally, China and Pakistan, India’s military adversaries, spend 2.5-3.0 percent and 3.5 percent, respectively, of their GDP on defence.

The Parliament’s Standing Committee on Defence has repeatedly emphasised that defence expenditure should be progressively raised to 3.0 percent of the GDP.

India’s quest for ‘defence on the cheap’ can only lead to another debacle like that of 1962. Even then, the defence Budget had fallen to less than 2.0 percent of the country’s GDP.

It has been empirically proven that defence expenditure up to 2.5 to 3.0 percent of the GDP has a positive impact on the growth rate of a country’s economy.

The government must gradually provide more funds for defence to enable the armed forces to acquire the combat capabilities that are necessary to fight and win tomorrow’s wars.

Simultaneously, the government must pull out all the stops to genuinely encourage indigenous manufacture of weapons and defence equipment. India’s aspirations to be counted as a regional power capable of maintaining peace and stability in the Indo-Pacific in conjunction with its strategic partners, and as a nation striving for world power status, cannot possibly be realised without self-reliance in defence acquisition.

(Gurmeet Kanwal is Distinguished Fellow, Institute for Defence Studies and Analyses (IDSA), New Delhi. This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)