View: Why Sitharaman's budgetary allocation is unlikely to satisfy defence establishment
Under Sitharaman’s leadership as defence minister before becoming FM, the armed forces had projected a combined shortfall of nearly Rs 1,12,000 crore.
Last week, finance minister Nirmala Sitharaman allocated Rs 4,31,011 crore to the ministry of defence (MoD). Of this amount, Rs 3,05,296 crore, or 71%, is earmarked for the three armed forces and the Defence Research and Development Organisation (DRDO), which together constitute India’s defence budget.
The rest is meant for MoD’s other expenses that includes Rs 1,12,080 crore for defence pensioners. MoD’s latest budget amounts to a mere 2.04% of the estimated GDP, though it accounts for a hefty 15.5% of total GoI expenditure. Even though MoD’s total allocation for 2019-20 has increased by 9.3%, the defence establishment is unlikely to be satisfied.
Under Sitharaman’s leadership as defence minister before becoming FM, the armed forces had projected a combined shortfall of nearly Rs 1,12,000 crore. Much of this was in the capital procurement budget that determines the potency of India’s arsenal. Such was the deficiency that MoD didn’t have enough resources to pay for past contracts.
In 2018-19, the shortfall was a mammoth Rs 67,363 crore. Against this, the FM has provided an extra allocation of Rs 6,893 crore. This is grossly inadequate, even after taking into consideration her budget announcement of exempting certain defence exports from basic customs duty, which the MoD estimates to result in a savings of Rs 5,000 crore a year over the next five years.
To compound this resources problem, MoD has signed over Rs 1,70,000 crore worth of contracts since the beginning of 2018-19. This would require an outflow of at least Rs 17,500 crore a year for the next several years. The primary reason for the adverse teeth-to-tail ratio — the amount of military personnel it takes to supply and support (tail) each combat soldier (tooth) — is the much faster growth of the manpower cost, which has now reached nearly 60% of MoD’s budget, from about 45% in 2011-12.
The increase in the manpower’s share has come at the cost of the acquisition budget, the share of which has declined from 26% to 18% during the same period. To tackle the rising manpower cost, the Narendra Modi government in its first term had constituted an expert committee under the chairmanship of D B Shekatkar to suggest measures to enhance combat capability and rebalance the defence budget in favour of modernisation.
The committee had given some 100-odd recommendations, some of which have been implemented. However, its impact is yet to be felt as the capital expenditure of the defence services has not shown any sign of improvement. It is high time to relook at why the revenue-capital mix has not improved and what additional measures are needed to fix it.
Any measure to fix the adverse revenue-capital ratio has to begin with tackling the 49 lakh manpower —31 lakh pensioners, 14 lakh uniformed personnel and four lakh defence civilians — who earn their salaries and pension from the MoD’s budget. In an age when space, cyberspace, AI, big data and robotics find increasing use, India cannot afford to spend the bulk of its resources on non-technology.
The defence establishment sits on avast amount of assets that include an expansive industrial infrastructure, and 1.73 million acres of land. The functioning of public sector defence companies has historically been inefficient. Accelerating their disinvestment process will not only improve greater accountability and productivity, but will also lead to generation of resources that can be used for much-needed defence purposes. Unused or underused land also needs to be put to commercial use for generating resources.
India need not replace every single obsolete tank, artillery and aircraft with new ones. A whole new approach to defence planning is needed to focus on the right technology, equipment and numbers, without putting too much demand on scarce resources.
(The writer is a research fellow, Institute for Defence Studies and Analyses (IDSA), New Delhi)