Hike in india's defence budget not enough

Discussion in 'Foreign Relations' started by sesha_maruthi27, Oct 15, 2010.

  1. sesha_maruthi27

    sesha_maruthi27 Senior Member Senior Member

    Aug 15, 2010
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    Hyderabad, Andhra Pradesh(INDIA)
    Hike in defence budget not enough
    Need for long-term modernisation plan
    by Maj-Gen Ashok K. Mehta (retd)

    ON the eve of the 78th anniversary of the Indian Air Force last week, Air Chief Marshal P.V. Naik made several strategic pronouncements, including that the Air Force is to acquire 250 to 300 fifth generation fighter aircraft in a joint development and production arrangement with Russia at a cost of $30 billion. Taken together with other military acquisitions over the next 10 to 15 years, India will be spending nearly $100 billion, the largest spurt in defence modernisation ever. But this alone will not alter the strategic environment to India’s advantage. It will also require new thinking and political will.

    The principal beneficiaries of the drive are to be the Air Force and the Navy which together have traditionally received less than half of the Army’s share in funding. This belated correction has stemmed not from any rational analysis but classic numerology: maintaining a 1.2 million-strong Army, 39 and a half squadron Air Force and a 100-ship Navy.

    The new British coalition government is contemplating deep cuts in the defence budget as part of reducing the budget deficit. Being considered is a freeze on aircraft carriers, downsising tanks and aircraft meant for Cold War contingencies and even reviewing the Trident nuclear deterrent. But no increase or decrease in defence capability can be ordered without a strategic defence and security review (SDSR). This warning came from Defence Secretary Liam Fox to Prime Minister David Cameron.

    No one knows how the military capability exercise is done in India where, leave alone an SDSR, not even a defence review or White Paper has ever been issued. Yet ACM Naik, who is also the current Chairman of the rotating Chief of Staff Committee, said that the new capabilities were “in tune with national aspirations”. He explained, “even Prime Minister Manmohan Singh has said that India’s area of responsibility extends from the Hormuz Straits to the Malacca Straits and beyond.”

    Each service does its future planning singly and not as an integrated whole to achieve a collective capability. Service Chiefs look out for clues about strategic aspirations from prime ministerial speeches at the combined commanders’ conferences and other heady occasions. The Army is currently engaged in a seminal exercise of transformation which has been “uplinked” with its long-term perspective plans and with those of the other two Services.

    It is noteworthy that the 11th Defence Plan (2007-12) is in its fourth year and not yet approved by the government. Nor has the 15-year long-term Perspective Plan (2007-2022). Further, the defence acquisition process is so warped that Rs 50,000 crore has gone unspent over the last 10 years for which no one is accountable. The DRDO, at best an unreliable and erratic performer, is one cause for a rise in spending. Still further, there is no integrated defence plan sanctioned by the government and ad-hocism and the Defence Secretary, in the absence of a Chief of Defence Staff, play a key role in shaping the future defence and security landscape.

    Otherwise what would explain the impossible two-and-a-half-front scenario: fighting conventional wars with Pakistan and China and combating an insurgency? Such a contingency has never emerged from any government directive based on an SDSR coupling defence and diplomacy — that is hard and, soft power — and, therefore, the concept never ratified by the government. Take the Army’s much-celebrated Cold Start doctrine which has sent shivers down Pakistan’s spine. According to Army Chief Gen VK Singh, Cold Start is not an official doctrine but part of new thinking.

    All novel strategic thinking on the part of Service Chiefs seldom attracts government sanction. So, most innovative thinking is done in a political vacuum giving the government the dubious advantage of deniability, whether it is a two-front war or Cold Start. Four years ago, soon after the Chinese shot down a space satellite, the Air Force organised a seminar on the domination of aerospace. Then Defence Minister Pranab Mukherjee ruled that India’s policy was benign and only defensive assets would be deployed in higher space. The IAF, however, wants to be a network-centric aerospace power.

    The Services cannot be faulted for advanced thinking to get out of the strategic static as governments have never and are unlikely in the future to indulge in future thinking and planning, especially on defence and security. Lack of political direction and strategic guidance have led to half-baked organisational structures, systems and procedures. So this year, the government has decided to upgrade and acquire $ 50 billion worth of aircraft, ships and submarines. The Army, which has hogged funds all this while, is to be starved of money for the modernisation of its artillery and air defence.

    It is entirely a different matter that these big ticket items of conventional deterrence are unlikely to be employed as the wars and conflicts of the future will be low intensity which require different skills and equipment. India has been fighting insurgency and terrorism for the last three decades with inadequate and inappropriate arms and equipment. That is why when Kargil happened and the government rushed to Israel and South Africa with an SOS, then Army Chief Gen V.P. Malik declared: We will fight with what we have and later embarked on a futile exercise of downsising manpower to create funds for modernisation, symbolising acute ad-hocism.

    In the late 1980s, Air Chief Marshal S.K. Kaul at a conference of industry and the Air Force said that the IAF did not need a deep strike aircraft. His advice was ignored and the government went ahead with a deal with Russia for Su-30 which is now the mainstay of the IAF. Under almost similar conditions earlier, the Jaguar aircraft was acquired at the behest of the government. The acquisition of the haunted Bofors gun was pushed by the government overriding recommendations for guns in the same caliber.

    What this suggests is that governments take keen interest in the purchase of weapons involving big sums of money.

    What is evident today is the scramble for making good the horrible deficiencies in aircraft and squadron strength which have declined from 39 and a half squadrons to 28. ACM Naik said that 50 per cent of the Air Force equipment was either obsolete or obsolescent at a time when the neighbourhood was volcanic.

    This unacceptable decline in operational readiness would not have occurred had there been an integrated long-term modernisation plan approved and sanctioned by the government. As a rising power with a 9 per cent growth rate, India is expected to have considerable military capability with advanced technology to appear to be an assertive power. But converting military power into political and diplomatic gain will not come easily, certainly not from the so-called Integrated Headquarters of the Ministry of Defence which is a big lie.
  3. sesha_maruthi27

    sesha_maruthi27 Senior Member Senior Member

    Aug 15, 2010
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    Hyderabad, Andhra Pradesh(INDIA)
    The Union Budget 2010-11 has raised the defence outlays to Rs. 1,47,344 crore (US $31.9 billion). This represents a growth rate of a mere 3.98 per cent, in nominal terms (or 0.3 per cent in real terms) over the previous years’ allocation of Rs. 1,41,703 crore, and far below the 34 per cent nominal increase witnessed in the budget for 2009-10. The sudden dip in the defence budget’s growth rate follows two related steps taken by the government. While the first one is related to the government’s resolve about fiscal consolidation, the second is on account of the acceptance by the government of the recommendation of the Thirteenth Finance Commission (TFC). This commentary analyses the latest defence budget as well as the likely impact of TFC’s recommendation on India’s future defence spending.
    Defence Budget 2010-11: Key Statistics

    Although the defence budget for 2010-11 has been increased by less than four per cent over the previous year’s allocation, it has nonetheless been increased by a modest 8.13 per cent over the revised estimate for 2009-10. In other words, the Ministry of Defence (MoD) has surrendered (at the time of revised estimate) Rs. 5,439 crore from the original allocations made in 2009-10. The surrendered amount could have been more if the Revenue Expenditure - which accounts for running expenses of the defence services - had not been revised upwards by Rs 1,561 crore over the original estimates. On the other hand, the Capital Expenditure - most of which is accounted for acquisition of defence hardware - has been revised downward by Rs. 7,000 crore.

    The marginal increase in the defence budget has a negative impact on almost all key components (see Table-I). On the positive side, however, the ratio between Revenue Expenditure and Capital Expenditure has been improved towards the latter. The improvement is largely due to the marginal increase in Revenue Expenditure, which itself was inflated in last year’s budget by salary increases and one-time arrears due to implementation of Sixth Central Pay Commission recommendations.
    Table-I: Key Statistics of Defence Budgets, 2009-10 and 2010-11
    2009-10 2010-11
    Defence Budget (Rs. in Crore) 1,41,703 1,47,344
    Growth of Defence Budget (%) 34.19 3.98
    Revenue Expenditure (Rs in Crore) 86,879 87,377
    Growth of Revenue Expenditure (%) 50.85 0.57
    Share of Revenue Expenditure in Defence Budget (%) 61.3 59.3
    Capital Expenditure (Rs. in Crore) 54,824 60,000
    Growth of Capital Expenditure (%) 14.20 9.44
    Share of Capital Expenditure in Defence Budget (%) 38.7 40.7
    Share of Defence Budget in GDP (%) 2.30 2.12
    Share of Defence Budget in Central Government Expenditure (%) 13.88 13.29

    Sources: Ministry of Defence, Defence Services Estimates 2009-10 and Ministry of Finance, Union Budget 2011.

    Among the defence services, the Army with a budget of approximately Rs. 74,582 crore in 2010-11 has the largest share, distantly followed by the Air Force (Rs. 40,462 crore), Navy (Rs. 21,467 crore), DRDO (Rs. 9,809 crore), and Ordnance Factories (Rs. 1,015 crore). However, in terms of Capital Expenditure, the Air Force with a budget of Rs. 25,251 crore holds the largest share (42 per cent) among the three services, followed by the Army (Rs. 17,255 crore; 29 per cent) and the Navy (Rs. 12,138; 20 per cent).

    From the modernization point of view, out of Rs. 60,000 crore, nearly 78 per cent (Rs. 46,521) crore will be available to the three services for procurement of Aircraft and Aero-Engine, Heavy and Medium Vehicles, Naval Ships, and Other Equipments (Armaments, Electronics, Ammunition, Missiles, etc.) among others. Within each service’s acquisition budget, the Air Force will have Rs. 15,206 crore for procurement of Air Craft and Aero-Engine; while Rs. 10,464 crore have been provisioned for procurement of Other Equipments for the Army. The Navy will get Rs. 6,950 crore for procurement of Naval Fleet.
    Figure: Shares of Defence Services in Defence Budget 2010-11

    Note: Figure is based on total Capital Outlay for Defence Services (Rs. 60,000 crore) minus Rs. 7.50 crore, which is allocated under the “Others” head.
    Source: Ministry of Finance, Union Budget 2010-11
    Why Meagre Growth in Defence Budget?

    While presenting the Union Budget, the Finance Minister (FM) emphasised that “Secure border and security of life and prosperity fosters development.” The 3.8 per cent increase in the defence budget (in comparison to the 8.6 per cent increase in total central government expenditure) does not however seem to be fully in sync with the above emphasis. This is more so when India’s more troubling neighbours have increased their defence spending at a sharp pace. Of particular interest is China, whose double digit increase in defence spending over the past twenty years and resultant military modernisation in both qualitative and quantitative terms has been taken ‘note’ of by the Ministry of Defence. (China’s 2009 official defence budget of $70.37 billion is 2.2 times that of India’s 2010 budget.) However the above ‘note’ does not seem to be backed by adequate growth in India’s defence budget. In fact, in the last 10 years, India’s defence budget has grown by 10 per cent and more only in three years.

    Notwithstanding the seemingly ‘direction-less’ growth in India’s defence budget, the reasons for the small increase in the latest defence budget is not so difficult to fathom. There are in fact two clear reasons for it. The first is related to the government’s resolve to “come back to the path of fiscal consolidation at the earliest.” It is noteworthy that the central government had announced several stimulus packages to fight the economic crisis which was harsher in 2008-09. As a result the fiscal deficit had increased to an unsustainable level. Now with the crisis less severe, the government has made an attempt to bring down the fiscal deficit for 2010-11 to 5.5 per cent of GDP, as against 6 per cent in 2008-09 and 6.7 per cent in 2009-10 (revised estimate). The fiscal tightening means limited the scope for accommodating more resource demands from the MoD which accounts for over 13 per cent of total central government expenditure. The scope has been further limited by the government’s focus on ‘inclusive growth’, by way of increased agricultural, social and infrastructural spending. For instance, in the Union Budget, the Finance Minister has increased the Central Plan Outlay on Agriculture, Rural Development, Transport and Social Sector by 14 per cent to Rs. 2,97,065 crore.

    If the imperatives of fiscal consolidation and ‘inclusive growth’ have limited government spending capacity, the MoD’s inability to spend the resources allocated in the previous year’s budget has also not helped its cause. As mentioned earlier, the MoD has so far surrendered. Rs. 5,439 crore from its 2009-10 budget. This inability to spend has no doubt strengthened the Finance Ministry’s justification for a smaller increase with the customary promise that “any additional requirement for the security of the nation will be provided for.” The Finance Ministry is fully aware that the MoD has difficulties in spending the allocated resources, especially the amount given in the capital account.
    Impact of Thirteenth Finance Commission (TFC) Recommendations on Future Defence Spending up to 2014-15

    If the Finance Ministry’s emphasis on fiscal prudence and inclusive growth has resulted in a smaller increase in the latest defence budget, the Report of the Thirteenth Finance Commission, tabled in Parliament on February 25, 2010, also does not paint a very optimistic scenario for India’s future defence spending. The Constitutional Commission, which has recommended on specific aspects of Centre-State fiscal relations, has also proposed a roadmap for defence spending for the period 2010/11-2014/15. As per the roadmap, defence spending is to grow by an annual average of 8.33 per cent during this period, with the revenue and capital components slated to increase by an annual average of seven per cent and ten per cent, respectively. As a percentage of GDP, defence spending is to be progressively decreased to 1.76 per cent in 2014-15 (see Table-II).

    Table-II: Thirteenth Finance Commission’s Proposed Roadmap for Defence Spending 2010/11-2014/15
    Year Revenue
    (Rs. in Crore) Capital
    (Rs. in Crore) Total Defence Expenditure
    (Rs. in Crore) Share of Defence Expenditure in GDP (%)
    (BE) 86,879 54824 1,41,703 2.42
    (Re-assessed) 73,968
    (-14.9) 54,824
    (0.0) 1,28,792
    (-9.1) 2.20

    2010-11 79,146

    (7.0) 60,306
    (10.0) 1,39,452
    (8.3) 2.12

    2011-12 84,686

    (7.0) 66,337
    (10.0) 1,51,023
    (8.3) 2.03

    2012-13 90,614

    (7.0) 72,971
    (10.0) 1,63,585
    (8.3) 1.94

    2013-14 96,957

    (7.0) 80,268
    (10.0) 1,77,225
    (8.3) 1.85

    2014-15 1,03,744

    (7.0) 88,295
    (10.0) 1,92,039
    (8.4) 1.76


    1. Figures in parentheses represent percentage growth
    2. The reassessed figures for 2009-10 is based on the figures of 2009-10 (BE) after factoring in the one-time arrears due to implementation of Sixth Central Pay Commission.

    Source: Author’s estimation based on the Report of the Thirteenth Finance Commission

    The significance of the above figures is that they are in sync with the fiscal consolidation part outlined by the Commission. More importantly, the Finance Ministry, which is in charge of implementing the Commission’s recommendations, is not only in agreement with the path but also tries to better the fiscal roadmap suggested by the Commission. This means that MoD’s future spending as outlined in the TFC could come under further stress in coming years.
    The Road Ahead

    While projecting the MoD’s budget through 2014-15, the TFC took into account the projections made by both the Finance Ministry and the MoD. The final projection by the TFC however turned out to be the same as made by the Finance Ministry - possibly to the dissatisfaction of the MoD, which argued for “the need to provide adequately for enhanced force multipliers.” The TFC however stuck to its guns, saying “the Finance Ministry’s projections address these needs [of the MoD]” and further added that:

    “we [the Thirteenth Finance Commission] are of the view that there exists considerable scope to improve the quality and efficiency of defence expenditure through increased private sector engagement, import substitution and indigenisation; improvements in procedures and practices and better project management, within the parameters of Government of India’s policy. Efforts in this direction will further expand the fiscal space available for defence spending.”

    The above assessment made by the Finance Commission needs careful consideration, given the indication that India’s future defence budget may not grow as desired by the MoD. In this regard, the Defence Ministry needs to carve out a plan as to where it can bring efficiency in its spending.

    At present, the defence budget is broadly divided into Revenue and Capital expenditures, with the former accounting for nearly 60 per cent of total budget. However, given the cost-intensive nature of capital acquisition, the MoD, as argued rightly before the Finance Commission, needs more resources for ‘enhanced force multipliers’. This makes a case for rationalisation of revenue expenditure, if the overall budget is to grow by a fixed 10 per cent annually. The MoD has therefore to revisit its spending on major revenue components such as Pay and Allowance; Stores and Equipment; and Transportation, among others. Of particular focus should be Pay and Allowances, which has increased significantly from Rs. 24,690 crore in 2007-08 (budget estimate) to approximately Rs. 46,767 crore in 2010-11.

    The way defence Capital budget is spent has been major a source of major concern, expressed by various authorities, particularly the Comptroller and Auditor General of India (C&AG). Besides, the repeated surrender of capital funds and India’s heavy import dependency have probably attracted the maximum attention for remedial measures.

    Although the MoD has taken a keen interest in alleviating the problems by way of revising the Defence (Capital) Procurement Procedure (DPP), some lacunae still persist. The biggest problem perhaps is the lack of an integrated acquisition structure, as brought out by the Reports of Group of Ministers (2001) and C&AG (2007). In the absence of accountability at one place, various acquisition functions, carried out by different agencies, lack a mission-oriented approach, often at the cost of optimum time-cost trade offs and indigenisation/self-reliance. This not only raises the acquisition cost but also delays or hampers defence preparedness. It is high time the MoD looks deep into this issue.

    Article by Mr. Laxaman Behera on Defence Budget by Maj. Gen. Nilendra Kumar, Director Amity Law School, AUUP
  4. sesha_maruthi27

    sesha_maruthi27 Senior Member Senior Member

    Aug 15, 2010
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    Hyderabad, Andhra Pradesh(INDIA)
    INDIA should concentrate on Security too.....
    Last edited: Oct 15, 2010
  5. sesha_maruthi27

    sesha_maruthi27 Senior Member Senior Member

    Aug 15, 2010
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    Hyderabad, Andhra Pradesh(INDIA)
    Military Budget

    The Finance Division of the Ministry of Defence is headed by the Secretary (Defence Finance)/Financial Adviser (Defence Services). The SDF/FADS is tasked with the exercising of financial control over the proposals involving expenditure from the Defence Budget and the Ministry of Defence (Civil) estimates, and with the responsibility for internal audit and accounting of the Defense Expenditure and expenditure from the Civil Estimates. In the task of internal audit and accounting, the Controller General of Defence Accounts (CGDA) assists the SDF/FADS.

    Defense planners face the task of reviewing programmes in the light of changes, which have taken place at the global level, as well as in the context of specific threats in the region. The endeavor of the defence planners is to balance the minimum requirements of Defence Forces and the need to modernize them, without unduly straining the national economy.

    The rules provide that no expenditure which has not been provided for in the Budget or which having been provided, has not been sanctioned shall be authorized without the concurrence of the Finance Division. The strict observance of this rule is automatically ensured as the Controllers of Defence Accounts will not make any disbursement in respect of charges not covered by regulations or Government orders.

    Until 1962 defense spending was deliberately limited. In the wake of the war with China, defense spending rose from 2.1 percent of the gross national product in fiscal year 1962 to 4.5 percent in FY 1964. In FY 1994, defense spending was slightly less than 5 percent of gross domestic product. In terms of dollars, FY 1994 total defense services expenditures were projected at US$7.2 billion (but are likely to have been close to US$7.8 billion). Proportionately, based on figures provided by the government, 48.4 percent of expenditures were for the army, 15.7 percent for the air force, 5.9 percent for the navy, and 30 percent for capital outlays for defense services and defense ordnance factories. The latter provide matériel to the armed forces through some thirty-nine ordnance factories and eight public-sector enterprises that build ships, aircraft, and major defense items.

    The defense budget for FY 1994 was 6.5 percent higher than the revised estimate for FY 1993. The allocation increased to 14.9 percent of the total central government budget, up from 13 percent in the previous two fiscal years. Nuclear energy and space research are not fully accounted for in the defense budget, but most paramilitary forces fall within the purview of the Ministry of Defence.

    After the Kargil war in 1999, the defence forces were spending less than the allocation. During 1999-2000, the defence forces spent Rs 48,504 crore - nearly Rs 3,000 crore more than the allotted sum of Rs 45, 694 crore. In 2000-01, they spent Rs 54,461 crore as against the allocation of Rs 58,587 crore – less than Rs 4,000 crore. In 2001-02, the defence forces are estimated to have spent Rs 57, 000 crore as against the revised allocation of Rs 65, 000 crore – a big gap of Rs 8,000 crore.

    (Rs. In crores)


    1996-1997 29505.08 9.86

    1997-1998 35277.99 19.57

    1998-1999 39897.58 13.10

    1999-2000 47070.63 17.98

    2000-2001 (RE) 54460.91 15.70

    2001-2002 (BE) 62000.00 136.84

    The increase in defence allocation for 2002-03 over 2001-02 was modest. The Finance Minister, Mr Yashwant Sinha, proposed a defence budget of Rs 65,000 crore against Rs 62, 000 crore allocated in the fiscal which is coming to an end. A significant development in the current fiscal is that the Defence Ministry will be spending only Rs 57,000 crore out of the allotted Rs 62,000 crore, leaving a shortfall of Rs 5000 crore. Thus, compared with the actual expenditure during the current fiscal, the budget proposes an increase of Rs 8,000 crore. The allocation for the Army has been fixed at Rs 35,368.72 crore, marking an increase of 6.69 per cent. It, in fact, gets reduced to 2.59 per cent while making allowance for inflation. The increase covers a number of sectors ranging from other equipment like tanks, artillery and electronic hardware such as weapon-locating radars, welfare and housing and stores (upgradation of existing assets). The increase on account of other equipment is a huge Rs 1,400 crore, revealing the government’s plan to provide the Army with the modern tools of war. The Air Force gets Rs 15, 589 crore, an increase of 30 per cent over the revised estimates. The allocation is expected to take care of the upgrading of the fighter aircraft (MiG-21 BiS), licence payment for manufacturing of SU-30 fighter aircraft and purchase of Jaguars from Hindustan Aeronautics Limited.
    (Rs. in crores)
    Year Budget Estimates Revised Estimates Actual Expenditure
    2002-2003 65,000 56,000 55,661.83
    2003-2004 65,300 60,300 60,065.80
    2004-2005 77,000 77,000 75,835.14*
    *Provisional, accounts not yet closed.

    In July 2004, in order to catch up with the backlog of expenditure that had not been provided for, the Government increased the allocation for Defence to Rs.77,000 crore. After a gap, defence expenditure in 2004-05 has matched the Budget Estimates. It was proposed to increase the allocation for Defence in 2005-06 to Rs.83,000 crore, which included an allocation of Rs.34,375 crore for capital expenditure.

    The Defence and Defence related Expenditure is about Rs.95,922 crores (2004-05), including the Civil Estimates of around Rs.16,000 crores comprising about Rs.11,000 crores towards Defense Pensions. The outlay for defence services in the Budget 2004-05 is Rs 77000 Cr. This consists of Rs 43,517.15 Cr for revenue expenditure and Rs 33.482.85 Cr for capital expenditure. The allocation is 17.92 per cent more compared to 2003-04 Budget. The increased outlay, particularly for capital expenditure, is a reflection of the Government's keenness to ensure speedy modernisation of the Armed Forces.

    Service-wise allocation for 2004-05 vis-a-vis Budget 2003-04 is as follows:
    2003-04 Budget 2004-05 Budget
    Army 34202.53 36277.50
    Navy 11980.66 13149.97
    Air Force 15419.32 23270.53
    DGOF (-)366.41 (-)139.58
    R&D 3647.60 4000.94
    DGQA 416.30 440.64
    Total 65,300.00 77,000.00
    Total $US $14.74 billion $17.38 billion

    The budget estimates 2004-05 cater to increased allocation for each of the services and research and development activities. An attempt is made to provide funds to meet the Service commitments both for meeting their maintenance requirements and modernisation. In addition to the above, one new feature in this year's Budget is exempting from income tax the family pension received by widows, children and nominated heirs of members of the Armed Forces and the para military forces killed in the course of operational duties.

    :Non-Plan Expenditure for Defence Services: (net of recoveries and revenue receipts in Rs. Crores)

    Head 2004-05 Budget 2004-05 Revised 2005-06 Budget % Change Budget 2005-06
    over budget of 2004-05

    (A) Revenue 43517 43517 48625 11.74

    (B) Capital 33483 33483 34375 2.66

    Total 77000 77000 83000 7.79

    The Union Budget for 2005-06 was presented to the parliament by the Finance Minister, Mr. P. Chidambaram on the 28th of February, 2005. In this, the allocation for Defence has been increased by about eight per cent over that of the last year from Rs.77,000 crore to Rs. 83,000 crore, or about $18.5 billion at current exchange rates.

    Purchasing Power Parity [PPP] is an indicator of the real conversion factor that should be used when comparing dollar and rupee costs. Prior to the the switchover to a flexible exchange rate arrangement in India in 1993, by one estimate the PPP ratio was about three. In the period after the float, by this analysis the market rate was close to the PPP value. [SOURCE] Another observer suggested that by 2003 the PPP was around six, that is, a salary of Rs 6 lakh in India is equivalent to a salary of one lakh dollars in the US. By 2004 the PPP was estimated at about five, or perhaps somewhere between six and eight. The precise PPP would depend on the basket of good --- that is, in principle there is a PPP that is specific to military spending, which would be different from that for the economy in general. Factoring in PPP, India's military budget might thus be estimated as the equivalent of about $100 billion.

    The allocation for defence for the year 2005-06 is well in tune with the policy of the government to give this core sector its due. The defence expenditure pegged at Rs 83,000 crore for the year amounts to an increase of Rs 6,000 crore or 7.79 per cent over the current year (2004-05). The revised estimate for the new fiscal has been kept at the level of Rs 77,000 crore, the same as in the budgetary estimate (BE) of the current one. The provision for revenue expenditure in the forthcoming fiscal is Rs 48,624.86 crore. The allocation for capital is Rs 34,375.14 crore which includes Rs 2,541.86 crore for research and development and Rs 1,364 crore for married accommodation project.

    The proposed increase in defence expenditure should take care of the normal growth in pay and allowances, inflation and other specific requirements. The bulk of the capital outlay goes to meet the requirements for the ongoing acquisition projects. The allocation for capital will be providing over Rs 7,000 crore for new projects for modernisation of the forces.

    India has to make up for what has been known as the lost decade of defence modernisation. In 2002-03 alone, it surrendered Rs 9,000 crore (Rs 90 billion). In view of this, last year the Budget had Rs 33,483 crore earmarked for capital purchases. But that was hardly sufficient for the whole purpose. The government decided to buy Mirage jets as well as Hawk trainer fighters. For the Navy, India had decided to go in for the aircraft carrier Admiral Gorshkov along with its MiG-29 fighters. Payments had to be made to honour contracts for airborne warning and control system (AWACS). The previous Government had signed these contracts but made no allocation for the same. Besides, New Delhi has had plans to purchase submarines, more multi-role fighter aircraft, multiple-rocket launchers, plane-based radar systems, light helicopters and artillery guns and many other sophisticated equipment for the three Services. The multi-role fighters and submarines alone are estimated to cost over Rs 20,000 crore. In other words, the last year’s capital outlay left little for any fresh defence acquisition. No wonder, immediately after the Budget was presented last year, Defence Minister indicated that the amount earmarked for capital purchases might not be enough for other necessary fresh contracts and he might have to seek additional funds from the Union Finance Ministry. The proposed capital expenditure has to be assessed in this context.

    It is, however, expected that the new allocation would enable the Services to move forward in the direction of their fresh acquisitions. Pertinently, in the new budget the revised estimate (RE) of the defence expenditure (DE) is the same as the budgeted estimate (BE). It means that the amount allocated at the beginning of the current fiscal has been fully spent. One can hope the trend to use the capital outlay would continue. The capital outlay for research and development has been increased from Rs 1,657.78 crore in the current fiscal to Rs 2,541.86 crore in the new one. This should help the DRDO in giving a momentum to some of its ongoing programmes. India has already started deploying its short range 700 kms Agni-I and intermediate range 2,000 kms plus Agni II surface-to-surface missiles. The DRDO is all set to carry forward the process of missile research and development programme so crucial for the country’s doctrine of ‘credible nuclear deterrence’ and triad. There has ,of late, been an increasing interface between the designer engineers and user agencies so as to determine what exactly is needed by the Services.

    The DRDO is developing a contemporary weapon locating radar for the Army. It is speeding up the manufacture of the main battle tank (MBT) Arjun to ensure its supply to the Army by due date. It has also been working on several naval projects. There are some analysts who argue that there is no fair increase in capital allocation this year. According to them, the provision for Defence Services Estimates in the Budget Estimates-2004-05 was Rs 77,000 crore. This had Rs 43,517.15 crore for Revenue Expenditure and Rs 33,482.85 crore for Capital Expenditure. The allocation of Rs 77,000 crore was an increase of 17.92 per cent over the provision of Rs 65,300 crore made in Budget Estimates of 2003-04. The capital outlay of the DE in 2004-05 increased by an almost 100 per cent from Rs 16,863 crore to Rs 33,483 crore. In contrast, in the fiscal year 2005-06, the capital outlay has increased marginally by 2.66 per cent from Rs 33,483 crore to Rs 34,375 crore.

    In the Interim Budget 2009-10, the allocation for Defence was increased to Rs.1,41,703 crore (US $29 billion), about 35 percent increase in current prices from the previous year’s revised estimates. The total revised expenditure for 2008-09 was Rs.1,14,600 crore. The Plan expenditure will be to the tune of Rs.86,879 crore against Rs.73,600 crore and will include Rs. 54,824 crore for capital expenditure as against Rs.41,000 crore in the RE for 2008-09. The raise has been made "to strengthen the security in view of the recent terror attacks." The Interim Budget 2009-2010 was presented to the Parliament on Feb 16, 2009 by Shri. Pranab Mukherjee, Hon. Min. of Finance and External Affairs, Govt. of India.
  6. Singh

    Singh Phat Cat Administrator

    Feb 23, 2009
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    Without having the read the piece, I am pouring out my thoughts on the topic.

    Every year, last quarter of the FY sees massive impulsive in some cases unnecessary purchases followed by the return of unspent funds to the tune of thousands of crores. CAG too has highlighted glaring loopholes in our defence preparedness inspite of having a huge budget.

    Without a proper roadmap (which we have to a degree) and a robust defence policy (which we don't have) the hiking of defence budget is meaningless. The budget hikes then would be a very Congress trait of throwing money to fix a problem because of lack vision and will.

    The Midget must go for the sake of the security of the nation.
  7. ajtr

    ajtr Veteran Member Veteran Member

    Oct 2, 2009
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    Most of indian defence purchases are done haphazardly just like CWG preparations.
  8. thakur_ritesh

    thakur_ritesh Administrator Administrator

    Feb 19, 2009
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    Land of the GODS - "Dev Bhomi".
    this needs to be looked at and this clearly tells a story good enough.

    revenue to capital expenditure ratio has improved for the good which is around 61:39. can someone highlight what the global average is, will be helpful though i am completely in favor of the ratio to be in favor of capital expenditure.

    should growth be just calculated on total budget outlay of the previous year or should it be calculated on capital expenditure since maximum in this year's time the revenue expenditure will become a fixed expense recurring over a period of 10years so all the growth is bound to happen in the capital expenditure so if we see a double digit growth on this expenditure lets say to the tune of 10-20% annually it should be more or less acceptable, which would mean and over all growth of around 4-8% of the over all def budget.

    given the above at no time should the defence budget exceed more than 2.5% of gdp other than when there is a real threat from external forces or be less than 2% of gdp, on similar lines the % share of def budget of annual union budget should remain between 10% and not exceed 17%. this should depend on fiscal situation of the economy.

    all the 3 services chiefs, their respective top teams and the MoD should be made to sit together and plan on how to spend the annual cap expenditure and their word on it be taken as final with no further discussions, further on the 3 services should recommend their top 2 choices on a certain procurement and the final decision on which brand of acquisition (if is can put it like that) to be made should/could rest with the ruling political class since defence acquisitions have a clear cut political tones and there are immense benefits to be had for the nation in return though this will leave room for corruption.

    they also need to put up a plan B/C in case a certain procurement is scrapped/re-tendered since surrender of capital outlay is a huge loss to the armed forces and it needs to be made sure that at no pint there be any surrender of capital outlay, for this the annual procurement should be divided on monthly/quarterly basis and the attempt should be that 85-90% of capital outlay be spent (on paper and otherwise) by the end of 3rd quarter. MoD has been unable to spend 50,000crs over a period of 10yrs is no less than treachery and for this successive raksha mantris from the time of NDA to UPA II and their secretaries need to be held accountable and adequate action be initiated against them.

    the procurement policy needs to be further fine tuned, it needs to be time bound and made as transparent as possible.
  9. Tshering22

    Tshering22 Sikkimese Saber Senior Member

    Aug 20, 2010
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    Gangtok, Sikkim, India
    I think the rate of spending is fine and is slowly and steadily rising. What we need is more internationalized training; special forces, counter-terrorism, sabotage, espionage etc. Though GOI has woken up late to international bilateral exercises, we must now take this seriously. Israel, Vietnam, Britain, Russia and US are top 5 countries specializing in different forms of warfare. Israel has a almost invincible air force and has the finest urban counter-terror training on the planet; Vietnamese are the masters of jungle and bush warfare as well as counter-guerilla tactics; Britain has handled multiple terrorist situations worldwide courtesy the elite SAS and Russia with its Spetsnaz, GRU and other special forces unit has ruthlessly culled jihadi terrorism from its Caucasus belt. All while US has expertise with their Marines, and amphibious warfare capabilities.

    We should expand training in these areas and train our troops to be more independent of the political civilian elite that are nothing but a bunch of inefficient, corrupted, shameless bozos. Issue a doctrine where forces when undertaking an operation, cannot be moved by civilian rulers and only until the mission is over, the civilian leadership can demand something. Troops should be trained to be ruthless and merciless when tackling enemies from across the border. Increase the pay of lowest level soldiers so that they're motivated to be sincere and not become sell offs, rather than wasting crores per year maintaining that Dadima's house called Rashtrapati Bhavan.

    Training is where everything matters and this has been proven in history repeatedly. We might not be able to match the Dragon weapon to weapon since they've had a 15 year head start and more sincere governance. But if we can compensate that with 905-100% war readiness, counter-terror readiness etc, we will not be just respected but feared in the region. Despite fighting 5 Soviet armed enemies simultaneously in late 70s with older Mirages and Merkavas, Israel destroyed their enemies totally. What better example than Vietnam could we have which brought down a world superpower to its knees and gave a tight slap across Mao's "Rising Power" China more than 3 decades back despite being armed with not even half the tech of US and China combined.

    Training to blade's edge perfection, motivation, practice and enhanced efficiency is the key to keep minimal casualty and superior kill ratios.
  10. SHASH2K2

    SHASH2K2 New Member

    May 10, 2010
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    Bihar, BanGalore , India
    One of most important factor that we are not very serious about is Cyber warfare. Just few minutes back I heard that CWG site was also targeted by Chinese. This is something all future wars will be about. We need to improve our Cyber offensive and defensive Capability. Given the dependency on network centric systems for both military and civilian systems .Its should very much be our Top Priority. Any future war will definitely have Cyber attack as part of it . They will first try to shut down our entire systems and then real attack will begin. Who knows they can destroy us without firing even a single bullet. Stuxnet is just a trailor of amount of loss we can face in future. We are somewhat on level with Chinese in conventional Weapons but in Cyber warfare we need to work really hard . We are really lagging and these recent chinese Cyber attackes are sign of days to come.
  11. sesha_maruthi27

    sesha_maruthi27 Senior Member Senior Member

    Aug 15, 2010
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    Hyderabad, Andhra Pradesh(INDIA)
    We are just seeing on side of the coin. We too have good hackers in our country, who knows they too might have hacked into the Chinese sites also. It is not required to show or expose the capabilities of our people and our country to our enemies. It is good to hide our capabilities than expose it to our enemies. "Never expose your power to your enemy. Use it to full advantage only when the need arsies. But do it in a way in which you do not expose what you know or have". This is very important in a war like situation. This is also very important in CYBER WARFARE also. INDIA DEFENCE EXPERTS know that we are or our sites and systems are being hacked. But they do not make much hype about that. First we should watch and be able to analyse the capability of the enemy fully. Then we should build counter measures for that and then we should make some offensive measures and finally when we attack there shouldn't be any time for the enemy to think or even blink his eyes. The attack must be swift one and also should have maximum effect. So, it takes time to develop such measures. "PATIENCE IS A VIRTUE".
    INDIAN CYBER EXPERTS are trying to develop their skills. Also INDIAN ARMED FORCES have started forming a CYBER WARFARE GROUP for these type of cyber attacks. They have also started recruiting people for this purpose. So, in the near future we will have a strong CYBER WARFARE DEFENCE also.

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