Defence - Articles

Debating Defence Expenditure

India's defence expenditure has always been an emotional issue. Debate, if any, has been one sided and there has rarely been any space for perspectives. This year was no exception. As the annual budget approached, a series of articles appeared in major national dailies. All of them had a common theme: the defence budget needs to be hiked by at least 25 percent. The actual allocation has, however, left them fuming.

Defence expenditure has always been a matter of debate around the world. According to development economists, any excess of military expenditure will reduce a government's capacity to spend on social and economic sector. The rise of 'disarmament - for - development' thesis also supports these propositions. A large number of defence economists, however, contend that the relationship between defence spending and economic growth cannot be generalized across countries. Growth is determined by many factors, of which defence expenditure might be just one. Some of them even contend that defence expenditure actually spurs economic growth.

Unfortunately, the Indian debate does not veer around these arguments. In the last decade, India's defence expenditure has gone up by almost five percent annually in real terms. It is true that as a proportion of GDP, the defence expenditure at 2.5 percent is not much, but due to sustained economic growth, the amount too is growing rapidly. In spite of that, the debate is centered only on 'amount'. The 'orientation' of defence expenditure that should have been of paramount concern is missing altogether.

Every year, a major chunk of the defence budget is kept aside for capital procurements. This year also, Rs. 34,000 crore has been provided. Here lies the problem. Seventy percent of our armoury is imported. Besides having to pay a moon for it, India is also vulnerable to technology and spare part support. For a country with great power ambitions, there seems to be no roadmap to reduce our dependence on imported weaponry. Partly this is because India's own military industrial complex (MIC) is highly underdeveloped. The government owned ordnance factories and defence PSU's are sluggish, under-utilised, and do not have the capacity to produce state of the art weapons. Their record of inventory management, cost management, and quality standards defy international norms. Also, Indian procurements have created jobs abroad and sustained the Western arms market for decades. At home, apart from the limited foreign investment, no other incentives and policy guidelines have come up to expand the domestic MIC. India is also a laggard in 'revolution in military affairs' (RMA). Wars have been waged and won in our West Asian neighbourhood on the sheer strength of technological supremacy. But our country is yet to wake up. The proportion of R & D in defence budget is only five percent, a dismal figure in comparison to Western standards.

Until recently, the services were dissatisfied on another ground. Due to technical and financial complexities in major procurements, there used to be an inordinate delay and even surrender of unutilised funds. There was also some frustration with the finance professionals due to their textbook interpretation of rules. For instance, many in the services protest the lowest bidder (L1) system as it often hampers their urgent needs.

While the L1 system will stay, more so, because of the Central Vigilance Commission's guidelines, the institutional response in the form of integrated financial adviser (IFA) at every level should bring the services some relief. Introduced under the new management system (NMS), the IFA system is aimed at decentralisation of financial powers, budgetary formulation, and control and accountability. If the IFA system works in synergy with other new institutional provisions such as the Defence Acquisition Council, the Defence Procurement Board, and the Defence Production Board, much of the grievances of the services would be taken care of.

On their part, the services also need to experiment in-house resource management. If China can bring down the strength of PLA from 4.7 million to 2.3 million while enhancing its combat capability, there should be space for some manpower pruning in India also. It is beyond one's comprehension why the army should continue with military farms when they cannot be run on sound economic principles and when easy supply is available from the market. The Navy and the Air Force, which have their own internal pay and accounting office, consume many times more manpower than Defence Accounts Department for similar work. Money saved from such ventures could be utilised for more technological investments in defence build up.

The present defence budget is a healthy amount. But it needs to be utilised in the best possible manner. There is, therefore, a need for a fresh debate on defence expenditure in India.

* Views expressed are his own