Defence preparedness

Govt will have to find more resources

One of the expenditure heads in the Interim Budget that was keenly anticipated was the spending on defence. In the Budget, allocations to the defence ministry are divided into four heads: The civil expenditure of the ministry (which is negligible); revenue expenditure on defence services; the capital outlay; and pensions. Total expenditure on defence services (excluding Ministry of Defence civil expenditure) is around Rs 4.55 trillion, of which about 38 per cent, or Rs 1.72 trillion, has been put aside for capex. 

When the Rs 1.41 trillion to be spent on pensions is added to the mix, total expenditure goes up to nearly Rs 5.96 trillion, and capex shrinks to 29 per cent of the total. Defence capex in the Budget is thus 9.4 per cent higher than in the Revised Estimate (RE) for 2023-24. This is below the rate of growth of nominal gross domestic product, which was estimated at 10.5 per cent. Total defence expenditure is expected to shrink marginally. Notably, in 2023-24 revenue expenditure was higher in the RE for the defence ministry than in the Budget Estimate (BE) by 10.6 per cent. The overall allocation for defence, including pensions, has now dropped below 2 per cent of gross domestic product (GDP), and excluding pensions defence spending is below 1.4 per cent of GDP. This shrinkage is largely in line with trends over the past years.

The question that must be asked, therefore, is how long a major shakeup of India’s defence allocations can be avoided. The wages and salaries bill for those currently serving is in any case higher than in peer countries as a percentage of total expenditure; and pensions are considerably larger. It is true that reducing these is politically difficult. The one-rank-one-pension promise has caused the pension bill to expand significantly, and recent attempts to change the system of recruitment for India’s personnel-heavy army caused widespread protests. Nevertheless, as it stands, India will struggle to pay for the modern equipment required to deal with 21st-century threats. This year, the Budget has made a change in how it reports its planned defence capex: It is no longer explicitly broken up among the three services. So it is far from clear how much will be spent on new equipment for the Air Force and the Navy.

However, it is worthwhile to note the specific projects mentioned in the context of the higher defence capex for the coming year (although smaller as a share of GDP) in the defence ministry’s press release after the Budget. These are: The modernisation of Sukhoi-30s alongside some new purchases of those aircraft; more advanced engines for India’s MiG-29s; and payment for the C-295 tactical transport aircraft, being manufactured by Tata Advanced Systems under licence from Airbus. Most of these decisions had already been taken. Three points, therefore, stand out. First, there is no real provision for big new purchases of platforms or aircraft. Second, the Navy might well find itself being shortchanged. And third, India’s defence co-operation with the Russian Federation shows no signs of slowing. All these militate against the projected image of India as a maritime power closely aligned with the Quad to manage Chinese aggression in the Indo-Pacific. The government will need to find resources to improve defence preparedness.