Revamp Defence Spending

Times of India

14th March 2008

The finance minister in this year's Budget has announced an outlay of Rs 1,05,600 crore for defence. It represents a 10 per cent increase over the previous year and may look impressive. But is this level of defence expenditure adequate given India's geo-strategic compulsions in its neighbourhood and its security imperatives? Can this sustain the ambitions of a nation on the way to attain 'superpower' status? Is it the maximum that India can afford to spend on defence? Based on an analysis of the international security environment and the military expenditure of some important nations, the answers to the above questions can only be in the negative.

The US is of course the largest military spender in the world. Its military budget is more than the combined budgets of the next 20 highest spenders in the world and it spends 4.1 per cent of its GDP on defence (3.1 per cent before the war in Iraq) while India now spends less than 2 per cent of its GDP on defence.

Let's look at India's neighbours. China spends an estimated 4.3 per cent of its GDP on defence and Pakistan 3.5 per cent. Beijing's high defence expenditure is evidently yielding dividends. Its relentless drive to attain blue water capability has enhanced its reach. Beijing's newly acquired capability to destroy satellites in space is another case in point and should give sleepless nights to mandarins in Delhi. China's claim to India's territories, including Arunachal Pradesh, is also a matter of grave concern to us.

The security threats that India faces are indeed diverse. Even sustaining the present rate of economic growth would require greater defence spending. For instance, the Sea Lines of Communication, which are the 'highways' of India's economic growth and on which is dependent around 90 per cent of India's overseas trade, needs to be protected. Given these security imperatives, the reduction in our defence spending as a percentage of GDP does not augur well for the nation.

The only silver lining is the increase in the capital expenditure (dealing with new acquisitions), which is the barometer of a nation's modernisation efforts. While the army, which consumes nearly 50 per cent of the defence budget, spends only around 25 per cent of its budget under the capital head, the navy and air force have succeeded in increasing their capital expenditure to nearly 60 per cent of their budgets. According to published data, the capital expenditure as a proportion of the total defence expenditure increased from nearly 25 per cent in 2000-01 to over 40 per cent in 2005-06. In tune with the growing trend, the budget for 2008-09 provides for over 45 per cent for capital expenditure.

But would it have been prudent for the finance minister to have further increased the defence budget? Paradoxically, the answer is no. The irony is that every year the three services and ministry of defence struggle to spend the defence budget. This triggers a blame game. The armed forces often blame the civilian bureaucracy for obstructing its acquisition proposals and accuse it of insensitivity to its modernisation needs. The bureaucrats in turn blame the armed services for half-baked proposals. The ministry of finance is also accused of undue delay in clearing proposals. Under virtually every government, defence allocations are not fully utilised.

The stark reality is that the present organisational set-up and acquisition procedures may not be able to handle larger defence budgets efficiently. With defence contracts often attracting accusations of kickbacks, officials are chary of displaying missionary zeal in processing proposals. The defence procurement procedures have no doubt been modified and made elaborate. But they are still seen as an obstacle to the expeditious processing of proposals. Formulation of staff quality requirements or specifications of weapons and systems are presently undertaken by the respective services and are time-consuming. Trials also do take considerable time and may be inevitable in some cases. The cumulative impact of all these drawbacks is that the much-needed defence modernisation of the armed forces suffers.

The need of the hour is a complete overhauling of the existing system and adoption of the best practices and 'smart acquisition' procedures evolved by countries such as France and the UK. France has the Delegation Generale pour l'Armement (DGA) and the UK the Defence Equipment and Support and Equipment Capability Customer. These are dedicated and integrated organisations with a well-trained workforce with long tenures. They are responsible for virtually all aspects of fulfilling the capability requirements of the armed forces and plan, budget, procure, conduct R&D and undertake trials. Integrated project management teams are also constituted for major projects.

However, in India, the approach is anything but integrated and the responsibility is diffused among many wings of the services and the ministry of defence with no one entity responsible for the final outcome. To compound difficulties, the workforce entrusted with the acquisition responsibilities has no training and short tenures.

The Kelkar committee in its report, Towards Strengthening Self Reliance in Defence Preparedness, of 2006 recommended the establishment of a similar system as the DGA of France in India. India cannot afford to wait endlessly to bring about a holistic change in the defence acquisition apparatus if it has to develop the military sinews required to be a true superpower.