The Defence Budget — Lowest Rise

March 1, 2016 By Ranjeet Kumar Illustration(s): By Anoop Kamath / SP Guide Pubns

Probably this year’s defence budget (2016-17) has seen the lowest rise in the hiStory of defence budgets. The negligible rise in this year’s defence budget will shock the armed forces and the strategic community who visualize a new great power role for the country. The NDA government has made a very meagre provision of Rs. 2,49,099 crores which is just Rs. 2,372 crores more than Rs. 2,46,727 crores defence budget of last year (2015-16).

The negligible increase of just 0.96 per cent gets more worrisome in view of the heavy devaluation of Indian currency compared to last year, when it hovered around Rs. 62-63 for one US dollar in comparison to present day foreign exchange rate of around Rs. 68-69. Since, the Indian armed forces are dependent on imports to the extent of 65 per cent, this year’s provision of just Rs. 88,340 crores for the capital outlay i.e. for the modernization of the armed forces will not be sufficient for the various acquisitions that the NDA government has promised in accordance with its ethos of making India militarily strong . Also, last year’s defence budget (2015-16) comprised 13.88 per cent of the total Central budget, which has now gone down to 10 per cent.

Also, the Manohar Parrikar-led Ministry of Defence (MoD) has cleared defence projects worth over one and half lakh crores rupees over the last year. These cannot be executed totally, in view of the limited provisions this year under capital outlay. At a time when the country is facing renewed threats and challenges on its borders and maritime areas of interest, requirements of arming its armed forces with the latest weaponry has never been felt more, hence the meagre provision for the nation’s defence would not suffice.

Reacting strongly to the budget, defence expert Air Commodore Prahsant Dixit (Retd) said, “Budgeting for defence expenditures in the 2016-17 Finance Bill was most perfunctory in style and content. Firstly, the Finance Minister did not even consider it important to mention it in his budget speech — an outlay of nearly 2 per cent of the gross domestic product (GDP). Secondly, it truly is out of sync with the regime’s sloganeering about ‘Make in India’ for defence equipment, with R&D getting only Rs. 1,102 crores more than last year whilst the work horse, the corporate sector left in distress. If the government believes that start-ups limited to Rs. 500 crores can achieve this with a three years tax holiday, then they are dreaming.”

Last year’s provision of capital outlay in the total defence budget was Rs. 74,229 crores. The armed forces could not fully utilize this amount and the MoD had to return over Rs. 12,400 crores to the finance ministry. Hence, the revised estimate of last year’s budget was reduced substantially.

Defence officials claim that the additional expenditure on the payments on account of the recommendations of One Rank One Pension scheme and implementation of the Seventh Pay Commission recommendations have put a great burden on this year’s defence budget. The armed forces has a serving staff of around 13 lakh and over 25 lakh soldiers get retirement benefits from the government. This expenditure will continue to rise and the MoD in discussion with the Ministry of Finance will have to find a way out, otherwise Indian defence will suffer the most. The pensions’ payments this year has increased substantially and an additional provision of Rs. 22,094 crores was made. Hence this year’s payments under defence pensions will go up to Rs. 82,332 crores. However, the defence pensions are made under a separate head of Defence Pensions, which is separate of the defence budget.

On defence research and development the government has made a minor increase of Rs. 1,102 crores, this year’s provision was only of Rs. 13,593 crores. For the three armed forces a total provision of Rs. 1,43,869 crores has been made which is Rs. 18,061 crores more than previous year’s Rs. 1,25,808 crores. Out of this, the Army has received the lion’s share of Rs. 1,13,732 crores , the Navy Rs. 17,424 crores and the Air Force Rs. 23,655 crores.

Experts are of the view that the finance minister has made provisions in the defence budget only for the regular upkeep of the armed forces and usual maintenance of its weapon stores. Last year the Defence Advisory Council of the MoD had cleared projects over Rs. 1,50,000 crores, however, it seems difficult to execute all these projects with the lowest ever rise in defence budget this year. Most important among all the projects is the commitment made to France for acquiring 36 Rafale fighter aircraft, for which price bargaining is currently on and the Indian government will have to shell out minimum of Rs. 60-65,000 crores. Likewise, the Indian government has also okayed the acquisition of Chinook and Apache helicopters from Boeing, worth a few billions US dollars. From Russia and Israel many sensitive defence projects are under implementation and in view of the meagre provision in this year’s budget one finds it difficult to induct high technology equipment in the Indian armed forces according to the strategic and tactical needs of the armed forces. Also one finds it difficult to understand from where the government will find resources to continue to implement the sensitive Mountain Strike Corps project on the borders with China and complete the project on schedule. Probably there would be many other projects of similar nature which will need extra financial resources from the finance ministry to fund.