Modernisation: The FM has set aside Rs 1,62,600 crore for the armed forces as capital expenditure that includes purchasing new weapons, aircraft and warships. Premier institutes such as IITs and even private varsities need to be incentivised to get into the defence sector to run academic courses. The government needs to provide tax incentives to defence manufacturers. Given the prevalent institutional limitations in manpower induction and cutting-edge technology, defence budgetary allocations are bound to run short for a nation the size of India. Innovative methods have to be found to augment the resources

by GP Capt Murli Menon (Retd)

IT is heartening that the defence budget has been hiked to Rs 5.94 lakh crore, 13 per cent up from the 2022-23 allocation of Rs 5.25 lakh crore. The enhancement includes Rs 10,000 crore addition in capital expenditure at Rs 1.62 lakh crore, a major portion of which would be for equipment and weapon acquisition from Indian private players for self-reliance.

The revenue expenditure of Rs 2.7 lakh crore, slated for maintenance of establishments as also payment of salaries and pensions, saw an increase of 15.89 per cent. The defence pensions saw a major hike at Rs 1.38 lakh crore — up by 16 per cent from Rs 1.19 lakh crore in 2022-23 — considering the increased pensions with the revision of the One Rank, One Pension (OROP) scheme and the arrears worth Rs 28,138 crore.

The outgo towards new acquisition of 126 4.5-generation MMRCA (Medium Multi-Role Combat Aircraft) for the IAF and the expected induction of indigenous and imported fighters for the Navy’s INS Vikrant carrier would be addressed by these allocations. The Navy’s procurement wish list includes submarines, guns, destroyers and underwater vehicles.

The Army needs new light battle tanks, artillery guns, armoured vehicles, including those for the Ladakh front requirements. As the lead on the Budget before the 2024 General Election, these figures do not indicate any major escalation in our security stance externally or internally.

At increases of 16.32 per cent, 10.96 per cent and 2.79 per cent for the Army, Navy and the Air Force, respectively, the budgetary allocations are not considerable when inflation gets factored in. The Border Roads Organisation (BRO) gets a substantial jump of 43 per cent in the Budget, clearly to cater for the urgent requirements to counter Chinese machinations along northern borders. The Defence Research and Development Organisation (DRDO) has been earmarked an outlay of Rs 23,264 crore, which is a hike of 9 per cent against last year’s allocation, once again barely enough to combat inflation. Capital expenditure increase for defence is a mere 6.7 per cent, against the nation’s overall capital expenditure commitments.

There are some positives in the Budget proposals nevertheless. Tax exemptions for the Agniveer Corpus Fund is one such proposal, riddled as it is with question marks about the controversial scheme’s viability. The 13.18 per cent of the total Budget of Rs 45,03,097 crore, even with expected annual inflation of 8-10 per cent, is a desirable enhancement, though whether it is large enough in terms of the nation’s Gross Domestic Product (GDP) is a moot point. Advanced democratic nations ought to have at least 3 per cent of their GDP earmarked for defence and whether India would reach that figure anytime soon is doubtful though, as our GDP is leapfrogging substantially — at least 7 per cent each year.

Indigenisation is the only way to bridge critical gaps in defence capability. The recent initiatives by the government such as OROP have increased the quality of life of an average serviceman and would help substantially in attracting better talent to the armed forces. The recessionary trends after the Covid pandemic and amid the Ukraine war are bound to take their toll on the budgetary pressures on ‘Third World’ economies. Tightening the belt is inescapable in all aspects of defence capability, from training to acquisitions and maintenance. Another aspect to consider in the defence sector is the transparency of the budgeting process. Since we do not practise a ‘black budget’ philosophy to hide some key projects, one wonders how the nuclear arsenals are budgeted for. Is our strategic arms capability within the realm of ‘national defence’ or is it under a different code head such as the DRDO?

Nevertheless, Rs 5.94 lakh crore out of Rs 45,03,097 crore total budgetary outlay, this year’s allocation signals the changed priorities of the government owing to incremental threats from China, while encouraging the indigenous industry to pitch in. At about 2 per cent of the GDP, our Budget compares poorly with Rs 18.86 lakh crore of China. As the economy recovers from the Covid shock over the next few years, India’s security considerations would perforce dictate an increase in defence spending to reach at least 3 per cent of our GDP.

The only way forward is to encourage more private sector companies such as TATA and Mahindra to participate in defence production, especially in the medium and high-tech regimes. Premier institutes such as IITs and even private academic universities need to be incentivised to get into the defence sector to run academic courses that aid the defence industry. Of course, the government needs to provide tax incentives to manufacturers in this sector. Given the prevalent institutional limitations in manpower induction and cutting-edge technology, defence budgetary allocations are bound to run short for a nation the size of India. Innovative methods have to be found to augment the resources.

The increased capital outlay for the Army is expected to be utilised for getting new specialised drones, loitering munitions, small arms and to upgrade existing tanks and armoured personnel carriers. That of the Navy would be utilised for ship-borne drones, loitering munitions, missiles, satellites and small warships. The IAF hopes to utilise its marginal increase in capital outlay to get new air defence systems, missiles, drones, anti-drone systems, satellites and combat helicopters.

The overall increase in defence spending is aimed to plug critical gaps in our defence capability vis-à-vis China. Hence, the focus on border infrastructure, drones and the like. A recent statement by a top US General talks of a possible conflict with China over Taiwan in 2025. Though the statement has been attributed to a personal view by the White House, clearly there’s more to it than meets the eye. Any such turmoil in our neighbourhood would impact India considerably. If a war in distant Europe could turn things topsy-turvy here in India, economically, any conflagration in or around Taiwan would have more serious consequences as China is bound to look for diversionary moves in Ladakh and elsewhere. Any reappraisal of the Indian defence budget, including the latest one, needs to be seen in this light.