An Indian Air Force contingent marches along the Rajpath during the Republic Day parade in New Delhi
An Indian Air Force contingent marches along the Rajpath during the Republic Day parade in New Delhi | Photo: T.Narayan | Bloomberg
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The allocation for defence is unlikely to see a substantial increase in the near future — due to India’s ongoing economic slowdown. For the Narendra Modi government to put more money into the defence sector, we will have to wait for India to become a $5-trillion economy, which at the current rate of allocation (as a percentage of the GDP) will double the defence budget. However, a major downside of this delay is that it will create a serious deficit in national security for a decade.

Finance Minister Nirmala Sitharaman in her Budget speech reiterated that national security was the government’s topmost priority. However, probably for the first time since India’s Independence, a finance minister did not elaborate on the allocation for defence. It is good that she did not, because she had little to say on the subject. The marginal increase in the defence budget barely caters for the inflation and falls well below the requirements of national security and the planned modernisation of the armed forces.


Also read: Unlike India, China built its economy & military before calling itself a world power


What the forces got

The outlay for defence (figures rounded off to two decimal points) has been increased to Rs 3.36 lakh crore from Rs 3.19 lakh crore, an increase of 5.8 per cent over last year’s budget estimate (BE) and only 1.9 per cent over the revised estimate for 2019-2020 of Rs 3.31 lakh crore. Capital outlay for modernisation of the armed forces has increased by 9.9 per cent from Rs 1.03 lakh crore in 2019-20 to Rs 1.14 lakh crore in 2020-21, which comes down to a mere 3 per cent increase compared to the revised estimate of Rs 1.10 lakh crore.

The revenue budget estimate (defence services revenue) is Rs 2.09 lakh crore as compared to last year’s revised estimate of Rs 2.02 lakh crore. The budget estimate for pensions has seen a whopping jump of 18.75 per cent — from Rs 1.12 lakh crore to Rs 1.33 lakh crore. The total defence budget, including pensions, is Rs 4.71 lakh crore, which is 15.4 per cent of India’s annual budget. Minus the pensions, it stands at 1.5 per cent of the Gross Domestic Product (GDP).

For the planned modernisation of the armed forces in their present form, which has been languishing for two decades, India needs to enhance the defence budget to a sustained rate of 3-4 per cent of the GDP.


Also read: Has CAG Siachen report exposed Modi govt’s muscular national security pitch as hollow?


Need for a strategic review

Rather than waiting for India to become a $5-trillion economy for more money to flow into the defence sector, the logical option is to review our approach to national security to better manage the defence budget and find alternative means to enhance it. If the Modi government takes a few hard decisions, then this can well be achieved.

India is a nuclear power, and as such we do not face an existential threat from our potential adversaries. Same is true for Pakistan. Our conventional deterrent is based on the 13 lakh-strong armed forces — high on manpower and low in quality. As per my assessment, two-thirds of the armed forces are equipped with barely-average technology and one-third with medium-level technology. Our qualitative edge over Pakistan is diminishing by the day, and the asymmetry vis-a-vis China is frightening. Our military strategy is to be prepared to decisively defeat Pakistan and stalemate China in all-out conventional wars.

Our government and the military have failed to understand the impact of nuclear deterrence and the quantum jump in military technology.

Decisive conventional wars are passé. Future wars/conflicts will be limited in aim, time, force levels, and geographical area. The aim would be to inflict a psychological defeat in a short time span, using high-end military technology. The 2019 Balakot air strikes and the 20-minute aerial skirmish the day after are excellent examples. The conflict ended in a
stalemate. The intent was right, but the decisive technological edge was lacking.

The Modi government must carry out a strategic review to assess the likely threats and evolve a pragmatic national security strategy that we can financially backup. The government must lay down the broad force structure of the armed forces with desirable quality, which must be matched with financial resources. The size of the current force must be optimised, and technological quality enhanced to ensure that at least one-third is equipped with state-of-the-art technology, particularly the Air Force and the Navy, and two-third with medium-level technology. The reforms must be government-owned and top-down in concept and finance.

Despite according topmost priority to national security, very little has been done in this regard. All that Defence Minister Rajnath Singh had to say about Budget 2020 was this: “The first budget of the new decade presented today by Finance Minister Nirmala Sitharaman gives an outline of a new and confident India. It is a promising, proactive and progressive budget which will make India healthy and wealthy in the coming years.” He made no mention of what he had projected, what was allocated and how he plans to bridge the yawning gap. The armed forces have simply resigned to their fate to make do with what is available.


Also read: Army buys ammo worth Rs 30,000 crore to fill shortage exposed after 2016 Uri attack


Slow march

On the financial aspect, the Modi government has woken up to face reality. In July 2019, the cabinet had amended the rules of the Finance Commission to address concerns regarding the “allocation of adequate, secure and non-lapsable funds for defence and internal security”.

Ministry of Defence has given its fund projection up to 2025 to the Finance Commission. An expert group has been set up under the Chairman of the Finance Commission to examine the modalities of creation of a roll-on, non-lapsable fund for capital procurements. The issues of a defence cess and tax-free defence bonds are under examination, as also the sale of surplus defence land and disinvestment of ordnance factories and other defence public sector undertakings. A cess of 1 per cent on direct taxes can virtually double the capital outlay for defence.

The current energy of the Narendra Modi government and the military seems to be spent on highlighting the threats rather than creating the capacity to deal with them. The latter requires tough decisions, which both are a shying away from.

Lt Gen H S Panag PVSM, AVSM (R) served in the Indian Army for 40 years. He was GOC in C Northern Command and Central Command. Post retirement, he was Member of Armed Forces Tribunal. Views are personal.

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6 Comments Share Your Views

6 COMMENTS

  1. The armed forces cannot be an exception to the Indian economy which has a bigger trade deficit with China than India’s defense budget. The reason India is like this can be traced back to 1949 and seventy years of India’s hybrid Colonial – Communist constitution and model of governance inherited from the British and designed to keep Indians subservient, importing goods and exporting wealth in a “For Government, By Government, To Government” Command Economy that places an enormous and constantly galloping overhead of over paid, incompetent, corrupt Non Productive Government and Public Sector employees and the non productive assets in their control on a diminshing and diluted productive (private) sector, garnished with doles, entotlements and reservations which have driven down standards in all walks of life rendering India incompetent to compete in quality and costs at the Intenrational level on any [product or service, including “Governance”.

  2. EVEN IF YOU ARE VERY LIBERAL INDIA IS AT BEST A $ 3 TRILLION ECONOMY . ASSUMING INDIA GROWS FOR NEXT FOR YEARS AT 10% -WHICH SEEMS IMPROBABLE GIVEN THE WAY ECONOMY HAS BEEN MANAGED SINCE 2014- INDIA MAY END UP AT $ 4.3 TRILLION. PEOPLE MUST REMEMBER THAT INDIA WAS A $ 800 BILLION ECONOMY IN 1991 AND WAS $2.5 TRILLION IN 2014

  3. One more cess for financing the defence! That will be the proverbial straw which breaks the camel’s back. India is one country where the IT payer gets nothing in return for all his labours and honest. Don’t burden him with more tax and cess. Shun this kind of suggestion.

  4. “Our military strategy is to be prepared to decisively defeat Pakistan and stalemate China in all-out conventional wars.”

    BIackies’ post-Kargil two decades military strategy to defeat Pakistan, was tested on February 27, 2019, when it lost two IAF jets and capture of a pilot, by a ten times smaller country, in size and manpower.

  5. Gen Panag has not really suggested any steps to counter the shortage of funds. FM could not allocate more because the arithmetic is simply against her. There are so many other priorities for the nation. If something can be done about the exploding pension bill then that should first be looked at – URGENTLY.
    Everyone is living too comfortably after retirement. Why not GOvt appeal for donations from pensioners and citizens every time there is a big new purchase to be made ? WHy can’t the officer level pensioners voluntarily donate Rs 50000 each to a special Defence Purchase fund , whenever the Govt has a crunch ?
    Secondly since it could take a decade to modernize,, India must work out how to come to some reasonable agreements with our neighbours , especially Pak and China. making the right compromises and initiating talks to reduce tensions should be a priority.

  6. I disagree partly to this view.
    Pension is the biggest hurdle in armed forces modernization let’s admit. It’s impossible to allocate 30% of budget to defense.
    Govt. must abolish the pension services and make the defense personal agree for one time post retirement settlement. Got the 13 Lacs + armed forces to half and increase the savings to add more fire powers.
    Privatize DRDO and HAL.
    I believe if Govt. able to do this, India’s military strength would manifold in next 5 years.

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