The Defence Budget FY 2021-22 has been a damper to national defence with the realities of its inadequacies far outweighing the politically stated positives. Indeed it is well understood that to revive the economy, funds will need to be invested across several sectors from manufacturing, health care to infrastructure, yet successive budget cuts driven by fiscal considerations rather than changes in the security environment have diluted the deterrence to territorial integrity from our adversaries. It would be apt to quote Walter Lippmann here: “A nation has security when it does not have to sacrifice its legitimate interests to avoid war and is able to, if challenged, to maintain them by war.” This remains the nation’s dilemma.
Ironically, the Finance Minister failed to even mention the defence budget in her speech, leave alone including defence in the stated six pillars of the budget, thereby reflecting populist overtones. This was indeed discomforting for the nation under threat to its territorial integrity and disheartening for the soldier braving both the vagaries of adverse weather and hostile enemy. The positives to acknowledge are the hopes of a dedicated domestic capital budget and the assurance that the “capital defence budget” will be non-lapsable as advised by the Finance Commission. Further, it was heartening to read the announcement of 100 more Sainik Schools from the existing around 18.
However, India’s military faces a massive financial dilemma in the fiscal year 2021-22, as its threats continue to escalate with a two-front overtone. Ironically, the economic landscape and the populist budgeting have shown little sagacity towards “walking the talk”, resulting in inadequate fiscal resources that would only widen the capability gap for countering escalating threats that the nation faces today.
To bridge this capability gap, induction of high technology military systems, force multipliers, creation of requisite infrastructure and joint force capabilities are required to complement the present force restructuring. Ironically, this was an important charter of the Chief of Defence Staff (CDS) under the Department of Military Affairs (DMA), which not only required skilful integration of the core competencies of the three services, but also financial support for its manifestation. But the situation remains unaltered.
There is unlikely to be any big bang with the missing buck, with the marginal increase that will cater for inflation and cost escalation etc. The total allocation for defence in the Union Budget at ₹4.78 lakh crore, including defence pensions, is a marginal hike compared to ₹4.71 lakh crore last year, a paltry increase of 1.48 per cent as compared to 1.82 per cent the previous year. In terms of the overall defence budget hike, excluding pensions, there has been a 7.34 per cent increase over last year, with allocation of ₹3.62 lakh crore. Even the defence budget as a percentage of Central Govt expenditure has seen a YoY decrease from 15.5 per cent in 2020 to 13.72 per cent in 2021. This has raised concerns of addressing the desired capabilities and infrastructure required for the armed forces to tackle the current two-front challenge, with the Ladakh standoff on the brim of a potential escalation. The overall allocation of ₹3.62 lakh crore, excluding pensions, comes to around 1.63 per cent of the GDP, though higher than 2020 is still subpar to even the 1962 allocation of 1.64 percent of GDP.
The volatile LoC, active proxy war and now the Chinese standoff will put a strain on both the revenue budget for force sustenance with the added deployments in Ladakh, and the capital procurement required for closing time-critical vulnerabilities and capability gaps. India spent a mammoth ₹20,776 crore on emergency and unbudgeted defence expenses in the last year as the armed forces went on panic mode for global procurement to respond to the China threat in eastern Ladakh. The knee-jerk emergency procurement, which has become more of a norm than an exception, comes at an escalated cost, time penalty, import dependency and shoddy quality, highlighting the inadequacy of the system and lack of synergy in matters of national security.
In the overall defence budget, the pension bill has reduced by ₹17,775 crore or about 13.4 per cent. This could be because allocation of about ₹18,000 crore was to be paid on account of pension arrears in 2020-21. Further, there has been a DA freeze. Also, salary and pension are based on actuals.
The capital allocation has however gone up to ₹ 1,35,060 crore, which is a healthy increase of 18.75 per cent from the last budget. Yet, it must be remembered that last year the armed forces got an additional allocation of ₹20,776 crore in the Revised Estimates, to cater to emergency procurements due to the LAC standoff. However, ₹1.35 lakh crore for capital acquisition is inadequate for any major procurement. Important big fish projects, be it army combat platforms, required quantity of IAF aircraft or naval aircraft carriers will have to be carried forward. Further, any increase in Revenue and Pensions expenditure will siphon off the capital fund. Much of the capital expenditure allocated to the defence ministry will go towards fulfilling India’s contractual obligations as committed liabilities on purchases made or already under progress from abroad. The Indian component may be deferred but not the global component.
Procedures, policies and indigenous efforts will only bear fruits if provided with sufficient funds, which remains elusive.
The focus on ‘Atmanirbhar’ (self-reliance) in defence could thus result in ‘Atmanishedh’ (self-denial) with limited funds available under the Make in India impetus, and projects under Make 1 category being put on the back burner. Further, ‘Atmanirbhar’ in defence is not always a cost-effective option as commented by CAG for comparative cost. Conversely, payments to DPSU and OF can be deferred resulting in additional orders like in ammunition, LCA Tejas and naval platforms.
The reality of the present defence budgetary model is that it gives extremely limited fiscal space for sustenance and addressing present “hollowness”, shows apathy to new schemes for modernisation to address the elusive “30:40:30 equipment profile” with bulk if not complete budget being sucked in by committed liabilities or scope for meaningful “Make In India” projects.
To conclude, the present budget is devoid of both quantitative and qualitative content and falls woefully short of the requirements of the services. As a nation, we cannot allow our brave and gallant soldiers to become cannon fodder in the absence of desired levels of modernisation and technology induction. Neither does an adverse equipment vintage profile, hollowness woes, or a knee jerk emergency procurement augur well for the nation.
-The writer has had an illustrious career spanning nearly four decades. A distinguished Armoured Corps officer, he has served in various prestigious staff and command appointments including Commander Independent Armoured Brigade, ADG PP, GOC Armoured Division and GOC Strike 1. The officer retired as DG Mechanised Forces in December 2017 and was Consultant MoD/OFB from 2018 to 2020. The Officer is a reputed defence analyst, a motivational speaker and prolific writer on matters military, defence technology and national security. The views expressed are personal and do not necessarily reflect the views of Raksha Anirveda
