Defence spending - up or down?
Written By
S Gangadharan
| Updated:
When it comes to defence outlays in India, he may well be right. Our budget figures often mislead.
Lies, damned lies and statistics, bemoaned the English statesman, Disraeli.
When it comes to defence outlays in India, he may well be right. Our budget figures often mislead.
The most often quoted number — Rs 141,703 crore, stated by the minister of finance in his speech — as the sum earmarked for 2009-10 is an underestimate. This pertains to only the defence services proper. There are allocations for defence civil services and the amounts apportioned to them in the demands for grants are quite sizeable at Rs 22,622 crore this fiscal and Rs 24,960 crore in the next.
Besides, considerable funds are apportioned for Border Security Force, nuclear research and exploration of space — all of which have military spin-offs. These are part of other ministries and departments and hence outside the purview of defence. But, when these are factored in, the actual order of defence spending is higher than what is popularly understood.
With this caveat, let us examine the defence spending in India, sticking to the commonly used data. In the next fiscal year, the allocation for defence in the interim budget is pegged at Rs 141,703 crore, representing an increase of 23.7% over the revised estimate for the current year.
Contrary to the popular perception, this represents a slowdown of sorts in that during 2008-09, the spurt was to the tune of 25%. The revenue head of the defence expenditure is projected to rise by 18% as against the preceding year’s 36.2%. On the face of it, the capital defence budget will be stepped up to 33.7% from 8.9%.
Here, if we take into account the fall in capital expenditure by about Rs 7,000 crore in the current year, the anticipated big thrust is exaggerated.
The budget estimate to budget estimate jump under this head between these two years is much more modest at 14.2%, from Rs 48,007 crore to Rs 54,824 crore. The slippage in spending under the capital defence budget is only to be expected as finalisation of deals involves time and even at the preliminary stages, protracted negotiations to identify the source of supplies are needed, followed by field trials and the final whetting process.
Inevitably, the sums allotted do not get fully utilised before the fiscal year closes and the amount lapses as there is no carryforward mechanism.
Seen in this context, the hike in capital outlay in the next year is not much to crow about, though there is a case for augmenting this even further.
In every budget speech, the determination to ensure that the needs of the defence services are fully met finds a mention.
The interim budget is no exception when Pranab Mukherjee observed, “Needless to say, any additional requirements for the security of the nation will be provided for”.
In reality, however, defence too is the victim of the resource crunch that the government is subject to. In the event, the promise of more funds for defence remains a myth; rather, judged by two parameters - the share of defence in total government expenditure and in the gross domestic product - there hardly any improvement. The trend is static, with a downward bias.
In 2004-05, defence accounted for 15.2% of the Centre’s spending; by 2008-09, this ratio has drifted lower to 12.7%.
But, the budget envisages this share to go up to 14.9% during 2008-09. This is at best conjectural and hinges on how the next government mops up resources to fund more defence outlays.
In relation to the GDP, the share of defence is actually declining. From 2.4% in 2004-05, the proportion has fallen to 2.1% in the current year and even if there is no shortfall under this head next year, still it will account for 2.4% of the GDP.
Admittedly, our defence expenditure is very low, even if include other spending referred to above that has military implications. Qualitatively too, there is a need to rethink the defence allocations.
The manpower costs are staggering and to economise on this, the need to improve the tooth-to-tail ratio is imperative. The resultant saving could be deployed to boost acquisition of modern weaponry and systems. At present, the defence capital outlay is less than half of the total defence budget.
In view of the fiscal constraints that we labour under- with committed expenditures like interest payments and the cost of the bloated bureaucracy to contend with and populism running amuck leading to a mounting subsidy burden —- it is hard to see how defence outlays can be jacked up.
Geopolitical considerations warrant this and every finance minister openly acknowledges this fact. Yet, when the crunch comes, it is defence that faces the axe.
When it comes to defence outlays in India, he may well be right. Our budget figures often mislead.
The most often quoted number — Rs 141,703 crore, stated by the minister of finance in his speech — as the sum earmarked for 2009-10 is an underestimate. This pertains to only the defence services proper. There are allocations for defence civil services and the amounts apportioned to them in the demands for grants are quite sizeable at Rs 22,622 crore this fiscal and Rs 24,960 crore in the next.
Besides, considerable funds are apportioned for Border Security Force, nuclear research and exploration of space — all of which have military spin-offs. These are part of other ministries and departments and hence outside the purview of defence. But, when these are factored in, the actual order of defence spending is higher than what is popularly understood.
With this caveat, let us examine the defence spending in India, sticking to the commonly used data. In the next fiscal year, the allocation for defence in the interim budget is pegged at Rs 141,703 crore, representing an increase of 23.7% over the revised estimate for the current year.
Contrary to the popular perception, this represents a slowdown of sorts in that during 2008-09, the spurt was to the tune of 25%. The revenue head of the defence expenditure is projected to rise by 18% as against the preceding year’s 36.2%. On the face of it, the capital defence budget will be stepped up to 33.7% from 8.9%.
Here, if we take into account the fall in capital expenditure by about Rs 7,000 crore in the current year, the anticipated big thrust is exaggerated.
The budget estimate to budget estimate jump under this head between these two years is much more modest at 14.2%, from Rs 48,007 crore to Rs 54,824 crore. The slippage in spending under the capital defence budget is only to be expected as finalisation of deals involves time and even at the preliminary stages, protracted negotiations to identify the source of supplies are needed, followed by field trials and the final whetting process.
Inevitably, the sums allotted do not get fully utilised before the fiscal year closes and the amount lapses as there is no carryforward mechanism.
Seen in this context, the hike in capital outlay in the next year is not much to crow about, though there is a case for augmenting this even further.
In every budget speech, the determination to ensure that the needs of the defence services are fully met finds a mention.
The interim budget is no exception when Pranab Mukherjee observed, “Needless to say, any additional requirements for the security of the nation will be provided for”.
In reality, however, defence too is the victim of the resource crunch that the government is subject to. In the event, the promise of more funds for defence remains a myth; rather, judged by two parameters - the share of defence in total government expenditure and in the gross domestic product - there hardly any improvement. The trend is static, with a downward bias.
In 2004-05, defence accounted for 15.2% of the Centre’s spending; by 2008-09, this ratio has drifted lower to 12.7%.
But, the budget envisages this share to go up to 14.9% during 2008-09. This is at best conjectural and hinges on how the next government mops up resources to fund more defence outlays.
In relation to the GDP, the share of defence is actually declining. From 2.4% in 2004-05, the proportion has fallen to 2.1% in the current year and even if there is no shortfall under this head next year, still it will account for 2.4% of the GDP.
Admittedly, our defence expenditure is very low, even if include other spending referred to above that has military implications. Qualitatively too, there is a need to rethink the defence allocations.
The manpower costs are staggering and to economise on this, the need to improve the tooth-to-tail ratio is imperative. The resultant saving could be deployed to boost acquisition of modern weaponry and systems. At present, the defence capital outlay is less than half of the total defence budget.
In view of the fiscal constraints that we labour under- with committed expenditures like interest payments and the cost of the bloated bureaucracy to contend with and populism running amuck leading to a mounting subsidy burden —- it is hard to see how defence outlays can be jacked up.
Geopolitical considerations warrant this and every finance minister openly acknowledges this fact. Yet, when the crunch comes, it is defence that faces the axe.