The defence budget is keenly watched every year on two counts. The first is fiscal parameters, which indicate broad trends in allocations. More importantly, it acts as a catalyst for defence planning and production. This year’s budget has to be read in the context of the constraining parameters of the Assembly elections and the economic downturn. Notwithstanding these challenges, national security threats and modernisation cannot be just wished away.
While serving in the Perspective Planning Directorate, we prepared the 12th Defence Plan (2011-2016), based on threat-cum-capability planning, with Pakistan as the primary threat. The current 13th Plan, in the era of ambiguity and winding up of the Planning Commission, has been reduced to an academic exercise. In the absence of dissemination of information, it appears that the key drivers for defence planning are focus on hybrid war, especially surveillance and surgical capabilities. These were supplemented with boosting deterrence through the Rafale aircraft, S-400 air defence umbrella and upgrade of strategic missiles.
Capability development was premised on one-and-half front template. Resolving insurgencies in Northeast and the Valley sequenced as first priority. There was reasonable assurance that the Chinese threat will be handled diplomatically. The Dragon sensed an opportunity in our slow-paced modernisation and embarked on wolf warrior missions in Doklam and Ladakh. We have belatedly woken up to the reality of two-and-half front threat and collusive threat. This year’s budget has addressed this altered reality with lots of optimism and some lofty projections, but sadly failed to provide adequate budgetary backing. It is essentially incremental and smart fiscal juggling.
Fiscal numbers are best understood in comparative, year-on-year framework. The defence budget (2022-23) allocates Rs 5.25 trillion ($70.2 billion), an increase of almost 9.82% over the initial allocation in 2021-22. Projection is equal to 13.31%, compared to 13.73% of the total expenditure, last fiscal. Percentage GDP share has declined to 2.04 from 2.15. Last year, the capital budget was increased by 18.75%, with procurements through emergency and strategic government-to-government (G2G) route. Budget projections taper it down to 12.82%, indicating slowing down of the modernisation momentum.
The budget has allocated Rs 3.64 trillion (69%) for operations, salaries and pensions. The latter will receive 33% of the allocation (Rs 1.19 trillion), an increase of 2.4%. Pensions alone account for approximately 23%. Capital outlay is projected as Rs 1.6 trillion, approximately 30%. While the burgeoning revenue expenditure is highlighted, yet the budget has not outlined any action plan, to redress these oft-repeated concerns.
The budget takes into account the unusually slow pace of expenditure of capital allocations in the current year. The Indian Army reportedly had spent just about 40% of its capital budget, the Air Force managing around 70% and only the Navy achieved a respectable 90%. The Navy has been reaping the benefits of committed liabilities, to ongoing projects, in domestic shipyards. Leasing option like the Sea Guardian drones by the Navy, needs to be emulated by the other services. The stark reality is that we lack a defence ecosystem, indigenous production, and above all, a functional procurement system, to expand even meagre allocations.
The Army’s capital outlay of Rs 320 billion, amounts to a decline of 12%. The Navy will receive Rs 475.9 billion, an increase of 43%, while the Air Force has been allocated Rs 555.8 billion, an increase of 4%. Despite a dismal outlook for the Army, there has been concerted endeavour to upgrade weapons, protection and surveillance for troops in combat zone, aided by emergency procurements. Increased outlay for the Navy and Coast Guard (39% increase) are indicative of an enhanced focus on maritime domain.
The main highlight was the announcement that 68% (up from 58% last year) of modernisation budget will be reserved for the domestic industry. In the last two years, more than 200 items have been added to positive indigenisation list. Yet, a reality check reveals that inclusions are low-value items, giving the list only quantitative boost. Atmanirbharta is an emotive concept but beyond hype, it needs to be backed up with vibrant production and an R&D ecosystem.
Pragmatism dictates that we adopt ‘Smart Atmanirbharta’, an economical and realistic objective. The prohibitive cost of indigenous platforms like Arjun tank and Tejas prove the point beyond doubt. The basic thrust has to be on minimising dependence in strategic sectors, characterised by technology-denial regime. Concurrently, we should aspire to become ‘smart integrators’, with expertise in selected niche areas, giving us the leverage for an envisaged integrator role. This in itself is tedious, given the current technology asymmetry.
The FM, probably driven by this realisation, has allocated 25 per cent of the total R&D budget for private industry, start-ups and academia. It is welcome and seemingly significant in percentage terms, but it amounts to Rs 3,000 crore, out of the total R&D budget of Rs 11,981 crore, a meagre increase of Rs 500 crore, from last year. It will require concerted effort to spend allocation as in current year, Rs 1,500 crore is likely to be surrendered.
The defence ecosystem needs to focus on laggards; DPSUs, ordnance factories and the Directorate General of Quality Assurance (DGQA). They all need to develop in-house R&D for product-and-process modernisation. In addition, they have to upskill for technology absorption for genuine Transfer-of-Technology (TOT). It is pertinent to recount the sad story of Bofors design languishing with the OFB for four decades till belated kick-starting of the Dhanush project. Enhanced allocations to border roads, development of border villages, Parvat Mala (connectivity-related) and Drone Shakti projects are welcome synergistic initiatives.
The ultimate wish of the armed forces, a non-lapsable modernisation fund, remains pending. A paradigm-shaping bold move can enable long-term planning and obviate the urge for year-end booking of funds and sub-optimal parking of funds with the Defence Public Sector Undertakings.
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