India's defence allocation is still lower than 2 per cent of GDP

Presenting her maiden budget speech in July 2019, Union Finance Minister Nirmala Sitharaman emphasised on immediate requirement of modernisation and upgradation in defence sector as "a national priority". However, six months later, Navy Chief Admiral Karambir Singh noted that the armed forces are finding it difficult to prioritise their requirements, owing to budgetary constraints. 

He added that Navy’s declining budget has forced him to re-evaluate the long-term plan to field 200 warships by 2027, a target institutionalised in the Maritime Capability Perspective Plan (MCPP) for 2012-2027. Now, the Navy is expected to have 175 warships by 2027. Currently, the Navy has about 130 warships and another 50 are under construction in shipyards in and outside the country. The Navy chief has also expressed concerns over its share of defence budget, which has declined from 18 per cent in 2012 to approximately 13 per cent in the current financial year (2019-20).

The decline has come at a time when the strength of Indian Navy's submarine fleet has dwindled from a total of 21 submarines in the 1980s to 15 conventional submarines, besides one homemade Arihant-class submarine and one Russian Akula-class submarine operating on lease. To make matters worse, the Indian Navy is operating with half of its submarine fleet strength as most of the vessels are in the last leg of their active operational life or are on mid-life upgrades. Meanwhile, China has a strength of 65 subs.

His counterparts—Chief of Air Staff Air Chief Marshal R.K.S. Bhaduria and Army chief General M.M. Naravane—also have their hopes high from the second budget of the Modi 2.0 government. With most of the budgetary allocation going for the committed liabilities and payment of salaries and pensions for defence personnel, the defence is expecting more allocation as several of the big ticket procurement are lined up.

India's defence allocation crossed Rs 3-lakh crore mark for the first time in the 2019-20 budget. At Rs 4,31,010.79 crore, including defence pensions, the total allocation accounted for 15.47 per cent of the Central government expenditure for the year.

That said, the allocation was still lower than 2 per cent of GDP. The low allocation is more pronounced when one compares China spending 3 per cent and Pakistan 3.5 per cent of their GDP for defence. It is to be noted that while India has 1.25 soldiers per 1,000 people, China has 2.23, and Pakistan 4.25.

In the July budget, Sitharaman had also announced that import of defence equipment not being manufactured in India would be exempted from the basic customs duty, on the request of the services. Defence ministry had claimed that the move will have an impact on augmenting the defence budget by approximately ₹25,000 crore on account of savings in expenditure on customs duty over the next five years.

Though the IAF got 38 per cent, or Rs 39,303 crore of the Rs 1.03 lakh crore capital component, in last year's budget, the world's fourth largest air force still struggles with its combat ability. From 42 squadrons of fighter jets in 2002, it has come down to 28 squadrons. The process of acquiring 104 fighter jets is still in early stages. On the indigenous front, finalisation of 83 Light Combat Aircraft Tejas Mark 1A is still underway between the IAF and the HAL. But with the tardy pace of delivery, the IAF does not have too much expectations from HAL.

Though the first Rafale jet was handed over to India in October, the first batch of four Rafale jets from France will only arrive in India by May 2020. The complete delivery of 36 Rafale jet contract worth €7.87 billion (approximately Rs 59,000 crore), will be done by April 2022. The IAF has been maintaining that once Rafale fighter jets are inducted into the fleet, it would be a “game-changer” in the subcontinent as the country would have significantly better air defence capability than its “regional adversaries”.

Defence analysts believe that the IAF has lost the edge it had two decades ago, during the Kargil conflict. Thanks to India's strong air defence then, Pakistan did not muster courage to carry out an airstrike on Indian soil. However, two months after Balakot, Pakistan received four airborne early warning and control (AEW&C) systems from Sweden, making the total strength of its AEW&C aircraft fleet to 10. On the other side, IAF operates only four such AEW&C systems, including three Beriev A-50EI Phalcon AEW&C systems along with one DRDO-developed Netra AEW&C system.

Efforts are on to procure two more Phalcon Netra AEW&C system from Israel. Besides fighter jets, important defence programmes such as mid-air refueller and IAF's 1960s vintage Avro transport aircraft are still hanging in the balance.

Last week, the Defence Acquisition Council headed by minister Rajnath Singh shortlisted two Indian shipyards, Larsen & Toubro Limited (L&T) and Mazagaon Dock Shipbuilders Limited (MDL), and five foreign companies for mammoth over Rs 50,000 crore Project-75-India for 6 diesel-electric stealth submarines for the Indian navy. On the aircraft carrier front, while China plans to have 10 aircraft carriers by 2049, Indian Navy is finding it difficult to push for India’s third aircraft carrier.

The Navy only operates INS Vikramaditya, while indigenous aircraft carrier INS Vikrant is under construction in Cochin shipyard and is expected to join by Navy fleet by 2022. Simultaneously, the Navy is also facing critical requirement of minesweeper vessels, as it only operates two minesweepers to protect its sea lanes and ports.

Simultaneously, the Army is also battling to get assault rifles for its soldiers along with its requirement of light utility helicopters, a lifeline for soldiers posted at the world’s highest battlefield—the inhospitable Siachen Glacier of the Himalayas.