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China matches India's expansion in military spending

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Both our defence budgets reveal only part of what we actually spend.

The announcement of a country’s annual defence expenditure is as much about geo-political signalling as about budgeting. From here, where the government announced a 12 per cent rise in annual defence spending last Monday, here is the big message: Notwithstanding our focus on development and social justice, and despite the still uncertain international economic climate, India will spend what is needed for an acceptable level of security.

Finance Minister Pranab Mukherjee, while presenting the in Parliament, allocated Rs 164,415 crore ($36.53 billion) to defence, which is 2.2 per cent of gross domestic product and 13.07 per cent of government spending. This continues an almost unbroken series of annual double-digit increases over the preceding decade, reflecting India’s economic growth and the region’s uncertain security climate.

New Delhi’s security concerns were mirrored in Beijing this morning, with China’s announcement of a 12.7 per cent increase in defence spending for 2011. In a statement that spread ripples of concern through the Asia-Pacific, raised defence allocations to 601.1 billion yuan ($91.5 bn), up from last year’s 532.1 bn yuan ($81 bn).

In March 2010, after Beijing’s relatively modest 7.5 per cent hike in defence spending, China experts had concluded that the People’s Liberation Army (PLA) was tightening its belt in an uncertain economic climate. But with Friday’s rise, following a year of confrontation in the East China Sea with the US, Japan and South Korea, PLA watcher Rory Medcalf of the Lowy Institute in Australia avers, “What this budget figure suggests is that deep down, China’s priorities haven’t changed.”

Experts agree that Beijing spends far more on the 2.3-million PLA (a term that includes China’s army, navy and air force) than what it divulges. The additional funds, estimated at 50-150 per cent higher than the announced figure, are believed to come from the PLA’s sizeable network of commercial enterprises that include hotels, transportation agencies and vacation resorts. Since Beijing provides no detailed breakdown of government expenditure, funds are also diverted from other departments.

Hiding the picture
This is also partly true of India. New Delhi masks a number of allocations that are universally regarded as defence expenditure, burying these in the allocations for other ministries. Business Standard has calculated, by applying international norms of what constitutes defence expenditure, that the budget for 2011-12 actually allocates Rs 235,962 crore for defence. A full Rs 71,547 crore of direct defence expenditure has been reflected under other heads.

Consider the following: The MoD budget does not include the defence pension bill of Rs 34,000 crore, nor the defence ministry’s allocation of Rs 4,156 crore. Also shown as non-defence expenditure is Rs 7,602 crore budgeted for atomic energy, though this funds the institutions that develop, build and store India’s nuclear weapons. Slipped quietly into the allocations for the ministry of road transport and highways is Rs 3,165 crore for the Border Roads Development Board, chaired by the minister of state for defence, which builds and maintains strategic roads in border areas.

Meanwhile central police and paramilitary forces that are directly employed — often under the army’s command -— for border security and counter-insurgency operations are funded separately. A Rs 22,624-crore chunk of the Ministry of Home Affairs budget is used for this, including Rs 7,369 crore for the Border Security Force; Rs 447 crore for the National Security Guard; Rs 1,900 crore for the Indo-Tibetan Border Police; Rs 2,544 crore for the Assam Rifles; Rs 1,601 crore for the Sashastra Seema Bal; Rs 7,625 crore for the Central Reserve Police Force; Rs 968 crore for border management and Rs 170 crore for coastal security.

This list does not include forces involved in day-to-day policing. The allocations left out are Rs 2,930 for the Central Industrial Security Force; Rs 40 crore for the National Intelligence Grid; Rs 947 crore for the Intelligence Bureau; and Rs 3,309 crore for the Delhi Police. Also excluded is Rs 279 crore budgeted for the Special Protection Group, which handles VVIP security.

Also regarded as non-military expenditure is the Rs 6,626 crore allocation to the Department of Space, despite frequent international allegations of technology leakage into the Defence Research and Development Organsiation’s military missile programme. Scrutiny of the Department of Space budget — with its transparent allocations to individual technology programmes — reveals conformity with an earlier government decision to firewall the space programme from missile development.

Taking the figure of Rs 235,962 crore as the real defence allocation, the government has actually allocated 3.16 per cent of GDP and 18.76 per cent of government spending to defence. This accedes to a long-standing demand from India’s strategic community for defence allocations to be at least three per cent of GDP.

Interestingly, the obfuscation in India’s real defence expenditure goes hand-in-hand with a new transparency in this year’s defence budget. The first project under the ‘Make’ procedure of the — which is the development of a Future Infantry Combat Vehicle by two consortiums led by Indian companies — has been allocated Rs 118 crore and even provided Rs 82 crore in the revised estimates of 2010-11.

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