By Amit Cowshish
There was nothing stimulating for the armed forces in the regular budget for the current financial year presented by Finance Minister Nirmala Sitharaman on July 23, except for an additional allocation of Rs 400 crore for a scheme many heard about for the first time. Infusion of this modest amount nudged the final budget a notch above the interim defence budget of Rs 6,21,540.85 crore.
This largesse is meant for ‘innovation in defence through the Acing Development of Innovative Technologies with iDEX (ADITI) scheme’ -a new addition to MoD’s alphabet soup of schemes- under which MoD is ‘engaging with start-ups/MSMEs and innovators to develop Def-Tech solutions for the armed forces.
It left some observers of the defence sector in India wondering whether it was a case of rechristening of iDEX (Innovation for Defence Excellence) Scheme, introduced by the MoD sometime in 2018, or an attempt to step up innovation and R&D by introducing another scheme alongside the Technology Development Fund set up around the same time, with similar objectives.
At any rate, ADITI seems to have trumped the announcement made at the time of the interim budget that a corpus of Rs one lakh crore will be set up for encouraging Deep-Tech. With so many schemes running concurrently under the aegis of different departments, and an increase of just about Rs 591 crore in DRDO’s budget, the trajectory of defence R&D -so crucial for real self-reliance in defence production- is far from being clear.
The armed forces continue to face resource crunch, even if its extent is questionable, despite the defence budget being the highest among all ministries and departments and accounting for about 13 percent of the total central government expenditure.
For sure, the capital outlay of Rs 1,72,000 crore and the revenue budget of Rs 2,82,772.67 crore for the armed forces look formidable, but the sum of these outlays’ accounts for a meagre 4.85 percent increase over the last year’s budget, though it is marginally higher than the 4.79 percent year-on-year increase in the overall defence budget, To put it in perspective, this measure of increase is barely in step with the annual inflation.
Objectively speaking, it is beyond the ability of any finance minister to allocate the funds normally demanded by the armed forces. The gap between the projected requirement and allocation went up from Rs 23,014 crore in 2010-11 to Rs 1,01,678 crore in 2022-23 before dramatically falling to Rs 32,214 crore in 2023-24, thanks to the armed forces paring down their requirement for capital expenditure to less than what they had demanded a year earlier.
There is nothing wrong in paring down the demand, but when seen against the fact that they had projected a much higher requirement to the 15th Finance Commission for the year 2022-23, the sharp decline in the demand raises serious questions about defence planning and the way the requirement of funds is calculated. This makes it difficult for the finance ministry to rely on the projections made by the MoD/armed forces.
It is for the MoD to resolve this problem and not for the finance minister to take the projected requirement at its face value and allocate funds accordingly which, needless to say, can be only at the expense of competing demands from other sectors like health, education, agriculture, social welfare, infrastructure development, and the like, whose important to the economy or to the e citizens cannot be underestimated.
In the absence of a real solution to the problem of overcoming paucity of funds for modernization of the armed forces and meeting other operational expenditure, the tendency on MoD’s part has been to exaggerate the importance of measures like earmarking of 75 percent of the capital budget for procurement of defence equipment from the local companies.
While this does contribute to an increase in local manufacturing, with its spin-off effect on the economy, such measures cannot help overcome the basic problem of paucity of funds or promote the objective of genuine self-reliance which must entail complete independence from reliance on foreign vendors for critical technologies that go into manufacturing of state-of-the-art equipment. This can come only via heavy investment in R&D and other non-fiscal measures.
Similar issues beset the revenue budget of the armed forces, especially the expenditure on salaries and pensions, which account for about 53.37 percent of the current year’s budget. Pension alone accounts for more than 22 percent of the defence budget. In absolute terms, the outlay on defence pensions has gone up from Rs 12,000 crore in 2000-01 to Rs 1,41,205 crore this year. Some half-hearted efforts have been made in the past to curtail this expenditure but to no avail.
The ministry of finance cannot force any solution on the armed forces, which need to take this issue more seriously as it is undeniable that in the overall scheme of things, this component of defence budget does impact availability of funds for operational expenditure on training, maintenance of in-use equipment and infrastructure, procurement of ammunition and the like.
Meanwhile, the government has done well by focusing on infrastructure development along the line of actual control with China. This is also true, albeit to a lesser extent, of coastal, security. With the allocation of Rs 6,500 crore to the Border Roads Organisation and Rs 7,651 crore to the Coast Guard, these organisations have their task cut out for them.
At the end of the day, these are isolated flashes in the pan. The real task of the MoD is to equip the armed forces with the military capabilities and other wherewithal required for preserving territorial integrity, power projection, humanitarian assistance and disaster relief, and internal security in highly disturbed areas.
While money plays an important role in all this, it is not the only resource required to discharge the responsibility cast upon the armed forces. It would be wrong to blame the inadequacy of budget outlays for all the problems besetting India’s defence. Budget is but a means to achieving well-planned objectives and goals, which requires MoD and the strategic community to look inwards rather than waiting for the finance minister to come to their rescue.
The author is Former Financial Advisor (Acquisition), Ministry of Defence.
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