Budget 2019: Defence spending likely to swell

It will be of great interest to see the nature, composition and direction of allocations to be made for the defence sector in this budget. Expectations are at its peak with the present finance minister as she was also the former defence minister, who would be having first-hand information of the issues and concerns confronted by India’s defence sector.

Mumbai: India’s armed forces have been in the limelight in the wake of Balakot air strikes and escalated tensions along the Indian borders with Pakistan. The Union Government led by a party with nationalist sentiments, which is known for largely backing the armed forces is getting ready to present its first budget in its new term.

It will be of great interest to see the nature, composition and direction of allocations to be made for the defence sector in this budget. Expectations are at its peak with the present finance minister as she was also the former defence minister, who would be having first-hand information of the issues and concerns confronted by India’s defence sector.

India's spending ondefencesector

India’s defence budget crossed Rs 3 lakh crores in the interim budget presented by the NDA-1 government, which was 6.96 per cent higher than the last year’s revised estimates. However as the new finance minister goes to present the budget, it is pertinent to remember that India spends less than 1.5 per cent of its GDP on defence. This is less than what China (2.5 per cent) and Pakistan (3.5 per cent) spend.

Impact of rising inflation and increasing exchange rate volatility

On the other hand in the wake of rising inflation and increasing exchange rate volatility, the amount that is to be spent on the acquisition of weapons and other military equipment would be actually lesser than what it is needed. The past committed liabilities will also have their share in the allocations and hence consume the budgetary allocations to a major extent.

In addition to this, the implementation of the One Rank One Pension, increased salaries under the Seventh Pay Commission, payments of pensions and arrears will be taking a toll on the allotted budget.

Need to boost defence spending

The policymakers need to consider these aspects during the allocations and further boost defence spending, by making bigger allocations to the defence sector, in the wake of the growing needs of the defence forces.

It is to be noted that the recommendations of the Parliamentary Standing Committee on Defence, to progressively raise the defence expenditure to 3 per cent of GDP.

Quality of spending is also important

While the quantity of allocation is important, the quality of spending of the defence budget is also equally important. For instance, India’s defence sector has a poor ratio of capital expenditure to revenue expenditure at 20:80. While the revenue expenditure is incurred on salaries, ammunition, transportation, clothing and maintenance, etc., the capital expenditure is made on replacement of obsolete weapons and equipment, modernisation, and expenditure on land and buildings.

Given this abysmal record of spending on modernization, India’s defence spending need to witness a qualitative change and there is a need of precise efforts to focus on improving the ratio of capital to revenue expenditure, in order to have an armed force that is superior in quality, not just the numbers.

Uphilltask to balance fiscal constraints and defence needs

It is, in fact, an uphill task to balance the fiscal constraints and the defence needs of the nation. While progressively increasing the defence budget allocations, and making efforts to maintain quality of spending, it is still possible to meet the fiscal obligations by laying emphasis on the optimal utilisation of the resources like land and buildings under army units across the country and generating their own revenues.

Efforts in this direction would go a long way to reduce financial stress on the Union Government, while not compromising on the quantity and quality of India’s defence spending.

(Written by Dr Mahendra Babu Kuruva, Assistant Professor at H.N.B. Garhwal Central University, Uttarakhand)