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Nitin Pai: Post-OROP recovery

Higher personnel costs mean the nature of military modernisation must be more capital-intensive than otherwise

Nitin Pai 

Nitin Pai

Now that the Modi government has decided to implement One-Rank-One-Pension (OROP) it is necessary to examine its implications for defence strategy and preparedness. It is not only the additional approximately two per cent it adds to the Union government’s expenditure, but the incentives it changes for everyone from the apex defence leadership to the prospective soldier, from foreign arms suppliers to domestic defence innovators. We’ll analyse many of these issues in this column over the next few months.

Today, let’s see what OROP is likely to mean for the future profile of the Indian armed forces. Adding an additional Rs 20,000-25,000 crore to the defence spending — and potentially more after the Seventh Pay Commission revises pay grades upwards — will exacerbate the defence policy trilemma: remuneration, defence preparedness levels and the fiscal balance. You can’t maximise all three simultaneously. OROP will raise remuneration levels and if this is not to come at the cost of defence preparedness, the fiscal balance will have to give. This usually means ultimately borrowing from our children.

While we can’t completely escape this trilemma, we can mitigate its effects: the best way is through rapid economic growth. We can reduce the effect of the additional fiscal burden of OROP if we have sustained economic growth. Veterans and their supporters would do well to demand reforms and economic liberalisation for that is a good way to prevent worried finance ministers of the future from whittling down OROP gains.

Even before OROP, thanks to two decades of economic growth in the country, labour has become more expensive relative to capital in many sectors of the economy. After OROP, as Ajai Shukla estimated in these pages last week, 53 per cent of our defence spending will be on personnel.

Soon after taking office in 1953, President Eisenhower faced a situation of rising defence expenditure — necessitated by the Cold War — getting out of hand and beginning to weaken the US economy. What he did then is an indication of what future prime ministers, if not Narendra Modi himself, might have to consider doing.

Eisenhower’s “New Look” strategy essentially involved investment in the strategic arsenal at the expense of adding additional manpower. Instead of large field armies stationed in Europe and Asia, the US would rely on nuclear weapons, intelligence-driven covert operations and allies. The threat of a “massive retaliation” intended to deter the Soviet Union from expansion. In economic terms, the Eisenhower administration set out to substitute labour (soldiers) with capital (nuclear weapons and delivery systems), because it felt that manpower costs would hurt the US economy. Eisenhower was convinced that the robustness of US economic growth was supremely important in his country’s struggle against the Soviet Union. Getting “more bang for the buck” was therefore necessary.

Could India take a similar route? Why not — for the sake of argument — rely entirely on nuclear weapons, missiles, aircraft and submarines and do away with most of the troops? Well, like Eisenhower found, the problem with such an approach is that adversaries won’t believe that you’ll use nuclear weapons merely because they crossed a border, or infiltrated militants in your territory or engaged in mass atrocities in their own. So, despite having weapons that can destroy entire countries, you still need the humble infantry to defend borders, for counter-infiltration and to take on insurgents. Given our geography, we will need similar forces to secure the maritime space and to carry out amphibious expeditionary operations.

These ‘frontline’ forces will need to be light, swift and networked. They will need to be supported with armour, missiles, air support, logistics and infrastructure to ensure that the military balance is in India’s favour along all its frontiers. But how far back must the back end be reinforced? If large-scale wars like the ones we saw in the 20th century are over, how much of the “heavy middle” between the strategic arsenal and the frontline forces do we really need?

If an Indian Prime Minister were to take a new look at our defence strategy, it would involve reviewing the heavy middle. If the overall effect of a growing economy and increased personnel costs is a shortage of troops, then the nature of military modernisation has to be more capital intensive than otherwise. Personnel policy must invest in consistently raising the productivity of the troops, through better training, better basic equipment, health and safety. These decisions have to be taken now as it will take years for them to affect outcomes.

Eisenhower had an instinctive understanding of opportunity costs. As he allocated half of all federal expenditure for defence, he despaired that “every gun that is made, every warship launched, every rocket fired is a theft from those who hunger and are not fed, those who are cold and not clothed.” The expenditure was worth it because the armed forces defended not just territory and people, but a ‘way of life’.

As president, his task was, “to make the Chiefs realize that they are men of sufficient stature, training and intelligence to think of... the balance between minimum requirements in the costly implements of war and the health of our economy”. Dwight Eisenhower’s words are as relevant to India today as they were to the United States six decades ago.

The writer is co-founder and director of the Takshashila Institution, an independent think tank and school of public policy

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First Published: Sun, September 13 2015. 21:50 IST