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Budgeting for the Nation’s Defence – India’s strategy
The allocation of Rs 83000 crore for the ministry of defence in the central budget for the next financial year presented by the Finance Minister P Chidambaram in Parliament on February 18 may not entirely whet the appetite of the defence establishment for more money but under the present security scenario this amount seems to be adequate enough to meet the essential prerequisites of our armed forces. Only last year there was a big jump to Rs 77000 crore from the earlier year’s allocation of Rs 60066 crore, which in percentage terms came to nearly 28 per cent hike. Is it possible each financial year to have one’s thickly iced cake and eat it too?

The projected spending for the defence services in the 2004-05 financial year comes to around 16 percent of the total Union budget and works out to be little less than 3 per cent of the national GDP. The armed forces always craving for latest equipment had demanded a 40 per cent increase in the outlay when the yearly budgetary exercise was underway. However, the new defence estimates carry only 7.8 per cent hike over the previous year’s estimates much to the chagrin of the MoD and senior army, naval and air force commanders.

Out of the allocation of Rs 83,000 crore for the defence of the country, nearly three quarters of it goes to meet the salary and allowances bills of nearly 1.5 million men in uniform in addition to a fairly large number of civilian employees working in DRDO, ordnance factories, Defence PSUs and several other departments manned by the civilians leaving precious little for maintenance of the military’s hardware. The remainder amount is juggled up to meet various other accounting heads. For instance this time there has been an increase in the allocation for the capital outlay by Rs 1000 crore. The total funds under the ‘capital ‘ head amount to Rs 34,375 crore and should facilitate in meeting contractual obligations for high tech weapon systems finalised earlier and soon to be in the pipeline.

The armed forces last year were compelled to surrender a large chunk of unspent sum to the tune of nearly Rs 9000 crore under the ‘Capital Head’ since the archaic rules did not permit carrying forward the funds to the ensuing financial year. But this year either by sheer chance or dint of hard work, MoD has been able to spend all the allocated funds under the capital head. Ironically, in the earlier years surrendering the unspent amount had become a yearly ritual—it was Rs 4000 crore in 2001 and Rs 5000 crore in 2002. The finance minister was perhaps echoing the right note while making a mention in his budget speech that defence expenditure in 2004-05 matched defence estimates after a long gap.

The three services for long had been pressing the government for more money to make new exorbitantly costly acquisitions as well as for meeting contractual obligations for the deals signed earlier. That their requests did not go entirely unheeded this time with the UPA government is proved by allocation of Rs 34,375 crore for capital expenditure. There are several major arms acquisition programmes of the three combat services that are pending with the Union cabinet for quite some time.

The army wants to purchase long range Smerch rocket system to bolster its artillery and low level transportable radars to intercept terrorists sneaking through the Line of Control and the international borders while the navy is keen to go in for French made killer hunter Scorpene submarines and US manufactured under water rescue vessels for the trapped submarines. A portion of funds earmarked under ‘capital’ head will be spent on refitting work of newly contracted aircraft carrier Admiral Gorshkov now in progress in Russia. The projected increase may also be used to obtain the long awaited Hawk Advanced Jet Trainers (AJTs) from the UK, new fighter aircraft to replace antiquated MiG-21s, Israeli Phalcon AWACS, unmanned air vehicles (UAV) and allied air warfare equipment. The process would hopefully provide fresh lease of life to the modernization process in the armed forces.

Since three quarters of the slice of the budgetary apple goes on to meet the pay and allowances of the soldiery and their civilian colleagues, it is high time to consider gradual reduction in manpower and make the fighting services lean and mean. Moreover there is also a high level of wastage especially in the defence R&D. The perennial delay in development of new weapon systems and carrier platforms, which escalates the costs steeply making them uncompetitive with the similar equipment available in the international arms market needs to be given a serious thought. The Arjun main battle tank and the Tejas Light Combat Aircraft can be cited as examples. As soon as Arjun MBT was available for induction, army opted for Russian T-90 tanks. Tejas LCA is still in testing stage and may take a couple of years to join the squadron service in the IAF. These two projects conceived way back in early 1980s have eaten up hundreds of crores of rupees without any benefit to the armed forces.

However, the high level of defence spending till now was justified in view of the hostile security environment in our region. Since the threat perception appears to be on the wane, the government can ponder over pursuing the policy of reducing the security related expenditure step by step. Even if the perilous clouds threatening nation’s security reappear in the horizons, the funds allocated can adequately take care of the forces’ requirements. Moreover, there is always an open channel for the government to request parliament for supplementary grants to make up the short fall if any.

Posted by Jehangir Unwalla @ 7:42 AM


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This blog focuses on current issues concerning defense and national security for the world's largest democracy - India. It is updated regularly providing readers with in-depth information on technology transfer, acquisitions, counter-terrorism, security and military collaboration and strategic dialogue between India and the United States. The site includes links to top defense policy & research institutes, think-tanks, military sites and research organizations.
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