Defence Budget 2017-2018

Issue No. 3 | February 1-15, 2017 Photo(s): By PIB
By Lt. General P.C. Katoch (Retd)
Former Director General of Information Systems, Indian Army


The Union Minister for Finance and Corporate Affairs, Shri Arun Jaitley departs from North Block to Rashtrapati Bhavan and Parliament House, along with the Minister of State for Finance and Corporate Affairs, Shri Arjun Ram Meghwal, the Minister of State for Finance, Shri Santosh Kumar Gangwar and the senior officials to present the General Budget 2017-18, in New Delhi on February 01, 2017

Defence has been allocated Rs. 2,74,114 crore ($42.17 billion) for fiscal year 2017-18. This does not include the pensions bill which itself is close to Rs. 85,000 crore per annum. At the same time, while pensions are excluded in this allocation, enhanced salaries on account of the Seventh Central Pay Commission (CPC) itself consume considerable funds. Already India’s expenses on operations and maintenance are dropping, while expenses on salaries have risen.

It may be recalled that defence allocation for FY 2015-16 and FY 2016-17 were same Rs. 2,46,727 crore. Media, therefore, is quick in calling the allotment of Rs. 2,74,114 crore for FY 2017-18 as a 6.2 per cent hike. However, it would be naïve to not view this defence allocation in the backdrop of the rupee depreciation coupled with yearly inflation rates of defence procurement, which would perhaps make any hike a misnomer. It may be noted that defence budget allocation of Rs. 2,46,727 crore in fiscal 2015-16 also stood at $40 billion, while Rs. 2,46,727 crore in last fiscal (2016-17) went below $40 billion in actual terms.

The hike required in fiscal 2017-18 was much more considering the rapidly expanding military prowess of China and a perpetually belligerent Pakistan, plus the expanding China-Pakistan collusive threats to our national security. Unfortunately, policy makers in India find it difficult to acknowledge that economy and development hinges on security and defence preparedness. Besides, some nurture illusion there never would be conflict. That is the reason why development of our border infrastructure, especially in the North East, remains pathetic; 16 strategic railways are still on paper.

Our existing procedure for evolving the defence budget involves: Services forwarding their wish lists to HQ IDS; HQ IDS forwarding the compiled list to MoD; MoD forwarding same to the MoF after some tinkering, and MoF imposing arbitrary cap without considering operational implications

It is distressing that Rs. 35,000 crore was unspent in this year and the spending was reduced in the revised estimates (RE). Whether this is on account of red tape or other reasons, it is criminal considering the poor state of equipping of the armed forces even at the cutting-edge. Significantly, the Parliamentary Standing Committee on Defence had noted in April 2015 that “such under-spending leads to a situation where the preparation of defence forces is nowhere near the target”. The Committee called for a “non-lapsable and roll-on allocation” fund for 5-10 years for defence equipment. Such a non-lapsable fund, administered by experts with strict controls on timelines, would reduce bureaucratic hurdles and be more attuned to practical realities.

Even during the previous NDA Government, Jaswant Singh as Defence Minister had recommended that the unspent funds of defence budget must be allowed go into the next financial year. Unfortunately, the government has paid no heed to these recommendations. The defence budget includes a capital outlay of Rs. 86,488 crore for new equipment, weapons, aircraft, naval warships, army vehicles, which is 9 per cent hike over the current fiscals capital outlay at Rs. 78,586 crore but it hardly is enough to bridge the existing critical deficiencies and much needed modernisation, even as the powers that be refuse to acknowledge the widening gap between the PLA and the Indian armed forces. Much of the capital outlay for the Indian Air Force will be consumed by the high cost Rafale aircraft. The allocation for new weapons, equipment and systems may have been increased, but not the quantum jump that is needed to rapidly bridge the gap. In backdrop of increased Chinese belligerence, even Japan that has no land border with China has passed a defence budget of $43.6 billion for this year.

In our case, the defence allocation is much below what was expected, partly sullied perhaps because of slowdown of the economy due to demonetisation. But the fact remains that we need a fresh approach to decide upon defence allocations, even though there appears to be no move to define a cohesive national security strategy. Allocating the defence budget or for that matter drawing up of the Long-Term Integrated Perspective Plan (LTIPP) in absence of a national security strategy and comprehensive defence Review is bad. But the true state of defence remains hidden and the true impact of defence allocations remain unknown. Our existing procedure for evolving the defence budget involves: Services forwarding their wish lists to HQ IDS; HQ IDS forwarding the compiled list to the Ministry of Defence (MoD); MoD forwarding same to the Ministry of Finance (MoF) after some tinkering, and MoF imposing arbitrary cap without considering operational implications.

It would be prudent for us to go in for prebudget presentations by the Army, Navy and Air Force to the Parliamentary Standing Committee on Defence (akin to procedure in the United States) giving their existing operational capability, budget demand, and what would be the capability if that demand was met. The Committee then should project to the government what the defence allocations for next financial year should be, giving their reasoning. The Committee report would also be on record which would also take into consideration the geopolitical realities and the operational perspective.