Defence Budget Allocations: Crunch Time

Defence Budget Allocations: Crunch Time

FOR a hyper-nationalistic government that boasts of a muscular military posture, the defence budget of 2020 strikes a discordant note. The finance minister, while presenting the union budget for the year in a dreary two-hour long speech, began by proclaiming that “national security is the top priority of this government.” Yet there was no mention of the allocations for defence in her budget. Perhaps the finance minister was embarrassed at the implications of the allocations she had made, and the message they sent out to the military, to the people, and to other nations, especially those it views as posing security threats to this country.

Fact is, the allocations for defence are meagre, insufficient for urgent requirements repeatedly projected by the armed forces, and imbalanced with serious negative impact on the pressing need for modernisation of the military. At the same time, it should be noted that these problems are not entirely new. This broad pattern of allocations has persisted over many years, revealing serious underlying problems for India’s military, crying out for attention and a long-term strategic vision and planning.

The total allocation for the ministry of defence (MoD) for 2020-21 is Rs 4,71,378 crore, roughly 1.4 per cent of GDP, the lowest since the 1962 India-China war. Of this total, Rs 3,23,053 crores ($45.8 billion) or 69 per cent has been provided under the defence services estimates, or what is considered the defence budget proper, for the three defence services and for the Defence Research & Development Organisation (DRDO). The balance is dominated by defence pensions at Rs 1,33,825cr (28 per cent), which has shown a dramatic increase over the past three years, along with Rs 14,500cr (3 per cent) for civilian expenses of the MoD.

Whereas the total MoD allocation has gone up by around Rs 40,000cr (9.4 per cent) compared to last year, pensions, and pay and allowances (P&A) together account for Rs 31,483cr or 78 per cent of this increase. It is to be noted that expenditures on defence pensions alone have risen enormously from less than 10 per cent of DSE in the 1980s to over 40 per cent in 2020-21 (as per IDSA estimates).

The manpower-intensive structure of the armed forces, particularly the army, is shown by the fact that its P&A accounts for 70 per cent of its revenue expenditure and 57 per cent of total defence budget in 2020-21 (IDSA).

The services, especially the army, have massive manpower numbers. The army alone has around 1.22 million serving personnel. Further, the numbers of pensioners has risen dramatically since the 1980s, due to a revision in pension policy related to period of service wherein a substantial proportion of personnel become eligible for full life-long pensions compared to 35 per cent earlier. Today, 2.2 times the number of serving personnel are eligible for full pensions, and in 2019 around three million persons are drawing full pensions, not counting disabled ex-service personnel. The One Rank One Pension Scheme will see the outlay on pensions rise even further. Of course, no one grudges the pensions due to ex-service men and women, but some restructuring is clearly called for.

In contrast, the allocation for capital outlays, that is acquisitions, for 2020-21 is Rs 1.13 lakh crore which is only 5.6 per cent higher than the budget estimates (BE) for 2019-20, and a mere 1.8 per cent higher than the revised estimates (RE) for last year. This is actually a drop in capital outlay in real terms after accounting for inflation and currency fluctuations.

The outlays for acquisitions and stores has been dropping steadily over the years, clearly due to increases in revenue expenditures, chiefly pensions and P&A. IDSA estimates that the gap between resource requirement and allocation has been hovering around 25 per cent for the past several years. Several reports by the CAG and by parliamentary committees have highlighted the severe shortfall in funding faced by the services and the potentially dire consequences for national security in the eventuality of armed conflict, especially the much-discussed “two front” war.

The most telling impact, however, has been felt in the modernisation plans for the defence services, at a time when the armed forces are engaged in restructuring and modernising their equipment in light of the huge technological changes and the related transformation in military doctrine being witnessed in recent times. In this scenario, the Indian military remains saddled with over 70 per cent legacy equipment and technology, some dating back to World War II. But the services face a severe shortage of funds for the envisaged modernisation.

The total allocation in 2020-21 for modernisation is Rs 90,649cr, which is an apparent increase of around Rs 8,500cr over last year’s but a meagre increase of only Rs 255 crore over the 2019-20 revised estimates. Therefore, this year too the services will face a severe funding crunch and a situation wherein, like in several previous years again as highlighted by CAG and parliamentary committees, allocations for modernisation for the current year are in fact less than liabilities or payments due for purchases already made in previous years.

Given the current state of the economy, and the apparent lack of funds for developmental expenditure, it appears that this situation is unlikely to change. Issues such as taxation measures, purposeful pursuit of recovering non-performing loans are outside the scope of this article. Some other measures are doing the rounds, notably through the finance commission based on recommendations of the services and the MoD. These include levying a special cess for defence acquisitions, earmarking funds realised through divestment of defence public sector undertakings for defence acquisitions rather than swallowing these funds in the bottomless pit of the treasury, and making the allocations for acquisitions non-lapsable etc. The last of these suggestions is moot, since no defence acquisitions have lapsed for many years now. However, some measures are evidently urgently required to enable badly-needed equipment and modernisation of the armed forces, and they need not be confined to the fiscal measures as suggested above.

In keeping with contemporary strategic doctrine, military technology and geo-political realities, India’s military posture and armed forces require to be fundamentally restructured and modernised. Simultaneously, suitable diplomatic measures are needed such as to reduce threat levels from potential adversaries and build mutual trust and understanding, and avoiding unnecessary over-reach. Finally, the services urgently need to be modernised both by shifting to more modern technologies and network-centric capabilities while drastically reducing manpower strength in a planned manner, as has been done my many militaries the world over including in India’s neighbourhood.

The services, particularly the army, are clearly far too manpower-intensive for a modern military. The days when army strength was dependent on numbers are long gone, and battles of today are not fought by swarms of infantry with bayonets fixed overrunning opponents lines. Today’s armed conflicts are more likely to involve deep penetration strikes by high-performance aircraft, missiles and drones combined with networking systems on airborne and space-based platforms, with more limited land-based actions which too would be focused less on foot soldiers than on longer-distance artillery, missiles, drones and such, although a slimmer, more capable and better equipped infantry, with shorter service periods and more personnel rotation, would also be involved. India currently lags far behind comparable countries in such capabilities and has not yet even drawn up actionable plans for such a transition. A shift from a manpower-intensive to a technology-intensive military will require considerable expenditure on acquisitions and indigenous R&D in the short term, which would however result in substantial savings in the medium to long-term from reduced expenditures in salaries, allowances and pensions.

China for example has moved in precisely in this direction over the past three decades or so. China’s armed forces of today are unrecognisable compared to the “human wave” tactics it relied on in the 1960s and 70s.

Part of this transition in China was brought about by geo-strategic shifts and suitable Chinese responses and modifications in its military posture. The collapse of the Soviet Union reduced the threat perception as regards China’s long northern land border with Russia. Synergistic revisions in both Russian and Chinese strategic postures and development of non-antagonistic relationships given the rivalry of both vis-à-vis the USA brought about further changes. China was also increasingly focused on the South China Seas, preparing for potential conflicts with Taiwan, disputed Pacific islands or elsewhere in the region, and expanding its presence as a putative major if not global power.

China reduced the size of its military by one million in between 1985 and 1987, including a reduction of officers by about a half, under the guidance of Deng Xiaoping who championed quality over quantity in the Chinese military, and initiated a shift to a lean, technologically advanced military capable of countering threats by any rival global power.  A further reduction of about 700,000 was brought about during 2000-2005 and the subsequent 10th five-year plan. Chairman Jiang Zemin officially incorporated the Revolution in Military Affairs (RMA) into Chinese military doctrine, rending it capable of fighting shorter-duration, local or regional conflicts under high-technology conditions, rather than prolonged land-based wars. These and subsequent changes saw the emphasis in the Chinese armed forces shift from the army to the air force, navy, missiles of different ranges and space-based capabilities. Almost half of China’s army divisions are mechanised or armoured, doubling such capability over a decade. China’s defence forces currently are under two million strong, roughly comparable to India’s but with huge outlays given its GDP many times India’s and with massive technological superiority in the region.

India needs to emulate this in a planned manner over a short duration keeping in mind India’s specific circumstances, while also laying greater stress on synergising its diplomatic, strategic and defence doctrines. In terms of costs, there will doubtless be a spike in costs in the short term but with significant cost reductions over the longer-term. Short-term plans should involve restructuring the military in each of the services and also in an integrated manner which the newly-created office of chief of defence services should facilitate but with a suitably devised and capable inter-services and civilian planning and command structure which is currently lacking. A planned down-sizing especially of the army should take place along with suitable modernisation of the three services with emphasis on networked capabilities and force multipliers. Further cost savings over the long run and greater strategic autonomy would be achieved by increased investment in indigenous R&D and technology development, enabling lower acquisition costs but over the longer term while domestic technology upgradation, manufacturing capacity and productivity scale up to required levels. As the common saying goes, short-term pain for long-term gain.