Defence Budget: Hard Choices Ahead for India

Trends in defence expenditure denote certain clues to assess especially the military component of a state’s comprehensive national power. Components of national power, in turn, are intricately linked to a state’s grand strategy - the latter connotes the desire of a state to achieve its rightful place in the global community. In brief, trends in defence expenditure tend to objectively assess aspects of a state’s military capability, although lacuna still remain as even the very concept of military capability is often value-laden.

The Government of India has hiked the defence budget to Rs 83,000 crores for the year 2005-06 from Rs 77,000 crores allocated in the previous year (2004-05) – an increase of 7.8 percent in nominal terms. In percentage terms, the Budget Estimates (BE) for national defence constitutes 2.37 percent of the Gross Domestic Product (GDP), nearly 14 percent of the Central Government Expenditure and less than 10 percent of the Total Government Expenditure. The capital outlay stands at Rs 34.472 crores billion and constitutes 41.1 percent of the BE. All three branches of the armed forces have witnessed increase – the Army has got Rs31,275 crores – a jump to the tune of 12 percent from the previous year, the Navy has Rs 6, 027 crores – a jump of 13 percent, and the Air Force has got Rs 9,004 – a jump of only 6 percent. The BE also shows an increase of 21.1 percent in spending for the Defence Research and Development Organisation, which stands at Rs 2,814 crores for 2005-06 (from Rs. 2, 343 crores in the previous year).

A debate on India’s defence expenditure is placed in the overall context of her grand strategic ambitions vis-à-vis her material capability and resources. At a time when India’s growing economic prowess and beyond-region strategic ambitions are well acknowledged, is India spending the kind of money that could give her desirable dividends in achieving her strategic ambitions? A closer look at trends in India’s defence expenditure suggests some pointers.

First, India’s defence spending has never been anywhere near a stage where it could be termed as a destabilizing factor in the broader global security framework. India’s defence spending, that has seldom crossed 3 percent of its GDP, in fact has been hovering between 2.5 to 2.6 percent for the past decade. Comparing this within a regional context would suggest that its neighbors like China and Pakistan have been spending relatively larger sums for national defence. Trends for the past 15 years suggest that while China’s defence budget has been witnessing a real term increase of 10-11 percent per annum (average at current prices is much higher), the same percentage is pegged at around 13 percent for Pakistan.

Second, real term increase, which is pretty marginal, in India’s defence expenditure has been witnessed only in recent times. Part of the explanations for this rise is attributed to the fact that it’s long ignored capital purchases during the 1970s and 1980s have resulted in weapons obsolescence in her inventory, which, in turn, has forced her to go for major procurements in recent times. One may even argue that such procurements are actually more for replenishment purposes than any major move toward force multipliers. Consider this – more than half of IAF’s existing fleet consists of MiG series, which is nearly four decades old. Informed sources point out that India needs at least 130 – 150 fighter aircraft in the next five to seven years. If the objective of India becoming a strategic stabilizer in the Indian Ocean and probably beyond and military exigencies beyond territorial terms are of any indication, then India must equip herself suitably, which in turn necessitates a major naval fleet expansion as well as modernization of land based assets.

Third, a huge gap exists between India’s domestic production efforts and her weapons requirements, resulting in a situation where almost 70 percent of actual requirements are met through imports. India’s investment in military R&D had never crossed 7 percent throughout history, while the same effort by the United States has rarely gone below 10 percent. Insufficient funding in military R&D efforts has impacted negatively on India’s indigenous production efforts, among other reasons.

Last but not the least, rationalizing defence expenditure by reducing the revenue expenditure and allocating more resources for capital purchases has been proved a herculean task for the defence planners, although some indications toward positive reforms are noted in the past few years. High revenue expenditure is unlikely to go down unless measures like rightsizing, de-linking the Army from internal security responsibilities, multi-tasking and other similar measures are undertaken.

A nominal increase in the defence budget has actually, in comparison to previous years, reflected stagnation. With growing security interests beyond South Asia, which otherwise suggests that India must enhance her military power beyond territorial defence, especially in terms of long reach capabilities. Such capabilities may cling more toward stabilization role, which blends both offensive and defensive orientations, than purely offensive in nature. However, matching such capabilities with available resources is difficult but not impossible.