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Business News/ Opinion / Views/  The government needs to think afresh about our defence budget

The government needs to think afresh about our defence budget

Look for innovative ways to finance a much-needed capability boost amid rising fixed liabilities

The army had received the M777 howitzers as part of an order for 145 guns.Premium
The army had received the M777 howitzers as part of an order for 145 guns.

Even in the best of times, making defence allocations is a brain teaser, given the resource constraints and competing claims of the three services. The covid-induced revenue crunch and Chinese belligerence make the exercise all the more complex, as the government faces the twin imperatives of operational readiness and capability building.

Over the years, defence allocations have been increasing incrementally. In 2019-20, India’s defence budget was 15.47% of the Union budget, equivalent to 2.04% of gross domestic product (GDP). Escalating revenue expenditure on maintaining the three services has been eroding capital resources available for capability building, reducing it to about 30% of defence service allocations. Consequently, even the payment of committed liabilities related to acquisitions and infrastructure has become a challenge. Even the revenue allocations are below requirements, leaving the top brass wondering how the forces could be in a state of high preparedness. Pension liabilities, which are well over 1 trillion, add to the woes. Uncertainty over the availability of capital funding defeats planning for capability building.

The need to equip India’s forces, especially the Army and Air Force on the eastern front through fast-track procurements on priority, will necessitate heavy revenue and capital expenditure. This could effectively hobble long-term capability building and ‘Make in India’, unless the government increases defence-service allocations disregarding its resource crunch. Strategically, a strong naval presence in the Indian Ocean is vital for keeping China at bay. The Navy has been pitching for a third aircraft carrier, while limiting its fleet to 175 warships. While this may be necessary for power projection, in the present circumstances, this has to wait. India’s submarine fleet of 15 is lean and old; China’s submarine fleet of 66 is expanding fast and Beijing is also helping the Pakistani navy build submarines. It is imperative that India’s Navy embark on a mission to expand its submarine fleet, acquire mine sweepers, helicopters, equipment like advanced towed array sonars—and strengthen the Andaman Nicobar command. The Navy has been trying hard to restore its share in the budget to 18%, but to meet new challenges, even this may have to increase. Instead of buying aircraft for carriers, equipping the Air Force with new aircraft to replace its MiG-21s should be a priority. Inducting new light utility helicopters to replace Chetak and Cheetah helicopters cannot wait.The unified air defence system also needs to be revamped to overcome obsolescence. India must necessarily strengthen its intelligence , surveillance and reconnaissance capabilities with state-of-the-art equipment, including unmanned aerial vehicles and unmanned combat aerial vehicles.

There is a dire need for India to intensify research and development efforts in areas like artificial intelligence (AI), robotics, quantum computing and cyber-warfare. China’s advances in aerospace and AI have been phenomenal. It seems far ahead in developing ‘intelligentized’ autonomous weapon systems. India must quickly match this switch to futuristic paradigms of war.

The challenge before the ministry of defence (MoD) is to accelerate capability development, braving the resource crunch. While combat readiness does not leave much room for curtailing revenue expenditure, implementing the Shekatkar Committee recommendations could lead to significant savings. Deeper integration will rid the services of many redundancies that contribute to pressure on the budget. Good examples of this are the newly-integrated air defence command and unification of the services’ fragmented logistics. New theatre commands will contribute to deep convergence, removal of flab and economies of scale. India has to curb defence imports if it has to accelerate the development of indigenous technology and reduce costs. Early acceptance of Defence Research and Development Organisation prototypes once key qualitative requirements are satisfied would help, and the doctrine of upgradation while in use need to be tried. Outsourcing research to the private sector will accelerate capability development.The MoD also needs to rely on private-sector production of ammunition to achieve cost efficiency. The MoD’s greatest asset is land, and innovative means of monetizing it for housing and infrastructure could be evolved. A contributory system of pensions for the armed forces could also be thought of.

It is now time to shed stodginess and embrace new ideas. Long-term capability building can take off only when the projected annual flow of funds is guaranteed through non-lapsable funding, an idea supported by the 15th Finance Commission. It will be good if the ministry of finance sheds its procedural conservatism and adopts this innovation in the larger interest of national security. The MoD, in turn, should put in place a special purpose vehicle to implement this great idea. The government would do well to raise India’s defence budget to 3% of GDP over the next five years. For this, it could consider floating national defence bonds and/ or introducing a special cess.

G. Mohan Kumar is former defence secretary of India

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Published: 05 Jan 2021, 10:07 PM IST
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