As with any modern nation that depends on defence preparedness to remain safe from predatory external forces, India needs weapons such as missiles, warships, submarines, aircraft and drones. The budget to buy these super-expensive stuff is earmarked during the Union Budget under the head ‘capital expenditure’ of the defence ministry.
Over the years, the acquisition of modern weapons has slowed down because the funds allotted for the procurement of new weapons have declined. The share of capital procurement in the defence budget decreased to 34 per cent in 2018-19 from 39 per cent in 2013-14. If the interim budget allocation for the Ministry of Defence remains the same in the Union Budget 2019, the share of capital procurement will decline to 25 per cent in 2019-20.
Defence budget, like any other budget, constitutes two heads — revenue and capital expenditure. While revenue expenditure includes expenses on salaries, pensions, stores required for running the defence services, funds under capital expenditure are used to acquire weapons for the Navy, Army and Air Force.
The allocated budget for capital expenditure has always been lower than required. In 2018-19, the projected requirement for the armed forces was approximately ₹1,30,000 crore but a sum of only ₹99,563 crore was allocated for the armed forces. Moreover, around 30 per cent of the capital outlay is used to cover most committed liabilities. Hence, the ministry is left with very limited funding for new projects.
Noting this trend, the Estimates Committee of Defence on July 25, 2018 said that a decline in capital expenditure has an adverse impact on the modernisation process of armed forces, and can compromise the safety and security of the country. It recommended that that India’s defence budget be increased to about 3 per cent of GDP.
India’s overall defence budget has been declining since the mid-1970s. The country’s defence expenditure was around 2.27 per cent of GDP between 1992-1993 but it has fallen to 1.5 per cent (excluding pensions) in 2019-20 (interim Budget).
In the interim Budget 2019, Finance Minister Piyush Goyal announced that India’s defence budget has crossed ₹3 lakh crore for the first time, but it was the lowest in over a decade in terms of the Gross Domestic Product (GDP).
Given the constant tensions in the neighbourhood India cannot afford complacency with regard to defence preparedness. Earlier, in March 2018, the Vice Chief of Army Staff had told the Parliamentary Standing Committee of Defence that 70 per cent of the army’s equipment was vintage and it had ammunition reserves only for 10 days of fighting.
In the past few years, India has signed mega deals for the acquisition of 36 Rafale fighters (₹1,377 crore each), 22 Apache attack helicopters (₹9,643 crore). Other deals include acquiring of MH-60R Seahawk helicopters (₹17,943 crore), Apache helicopters (₹15,864 crore), 10 more Poseidon-8I long-range maritime patrol aircraft (₹20,703 crore approximately), 30 armed Sea Guardian (Predator-B) drones (₹17,943 crore), and leasing Akula-1 nuclear-powered attack submarine (₹20,706 crore). On July 2, India also invited ₹15,000-crore bid for buying six missile warships and other smaller vessels.
A bigger chunk
In rupee terms, India’s defence budget has been increasing marginally over the years. However, the rise in the budget was not on par with inflation and a major chunk of it went for paying salaries and pensions.
An analysis over a decade shows that the revenue expenditure has been increasing and forms nearly two thirds of the defence budget. Share of revenue expenditure is typically high because the Indian defence forces are personnel-intensive, with a sanctioned strength of 14.8 lakh personnel.
In 2016-17, One Rank One Pension scheme, and some recommendations of the Seventh Pay Commission were implemented increasing salaries and pensions of defence personnel. As a result, the revenue expenditure shot up further.
Since the Army is operating with large scale vintage equipment, a Standing Committee on Defence in its 2014 report stated that it is essential to have a revenue capital ratio in favour of the capital segment to ensure all the services are in a war-ready mode.