Decoding Defence Budget: Bigger visions could fall short

Promising for the middle class and focusing on fiscal consolidation at a time when inflationary and fiscal deficit trends are looming large, the Union Budget of the 2023-24 fiscal year is geared towards incentivising the domestic economy. The same could not be said for India’s defence budget amounting to USD 72.2 billion (Rs 5.94 lakh crores) which is ranked third highest in the world following China and the US. This comes to about 13% of the total budgetary allocationa modest 13% hike from the previous year’s budgetary estimates and 1.5% over the previous year’s revised estimates. India’s defence budget may be incomparable to the total defence allocation of USD 229 billion and USD 801 billion of China and the US respectively, however, the quality of allocation has to be considered at closer quarters to gauge the defence priorities in the upcoming year.

Although heavy on revenue expenditure such as salary, pensions and dayto-day expenditure of running the defence establishment, taking a stock of the non-salary revenue and capital expenditure sectors where there has been increased allocation tells a promising, albeit, concerning story. Overall, the non-salary and operational allocations registered the highest increase by about 44% to Rs 90,000 crores, which is a signage of the government’s commitment to ensuring high-level operational preparedness to face any kind of current and future threats. This essentially means that the additional funds are mobilised to bridge the gap in critical capabilities, stock military reserves, strengthen forward defences, emergency procurement of ammunition as well as sustenance of weapon systems, platforms and their logistics.

A portion of this allocation is also meant to facilitate training aid and simulators for Agniveers. Nevertheless, the defence budget which amounts to 1.97% of the projected GDP of 2023 has been dubbed disappointing by security pundits who advocate for a 5% allocation of the GDP to defence. This may not be unpardonable considering that the largest military spenders – China and the US – spend between 2 and 4 % of their GDPs on defence. However, the difference is that they do not have a tricky security situation knocking on their doors as India does. India’s precarious security situation on its borders with China (border skirmishes), Bangladesh (refugee inflow and illegal migration), Myanmar (illegal cross-border trafficking of arms, persons and drugs), and Pakistan (cross-border terrorism) necessitates robust and focused allocation.

Towards this end, firstly, the capital budget of the Border Roads Organization has been increased by almost 43% to a total of Rs 5,000 crores which will be pivotal to being “battle-ready” to tackle security challenges on India’s borders, especially with China. The predominant focus has been given to the Sela, Sela-Chhabrela and Nechiphu tunnels in Arunachal Pradesh bordering China which is expected to accelerate border infrastructure development. Enhancing border connectivity will enable cutting down of time in accessing the LAC, and moving provisions and ammunition faster for the Indian army in all weather conditions. Secondly, the R&D allocation to DRDO has seen a 9% hike to almost Rs 23,264 crores to foster innovation through innovations for Defence Excellence (iDEX) and Defence Testing Infrastructure Scheme (DTIS) and strengthen the defence industrial ecosystem in the country. Meanwhile, additional funds allocated to MSMEs through Credit Guarantee Schemes and the newly announced National Data Governance Policy are expected to engender a healthy and successful Defence Start-up ecosystem. However, the question is really about whether the budgetary allocations shrink in the face of the tremendous nature of challenges India could face from its traditional as well as newer fronts. In the past, India’s aggressive approach and increased allocation towards domestic production and procurement under Make in India was indicative of promoting self-reliance as a foundational plank.

Boosting local defence manufacturing was expected to cater to a huge potential export market for Indian weapon systems in the US, the Philippines, West Asia and Africa, and South-east Asia. And, indeed, in the financial year 2021-22, our arms exports touched a record high of Rs 13,000 crores (USD 1.5 billion) with 70% and 30% contributions from the private and public sectors respectively. However, this budget finds no mention of Make in India initiatives in the defence sector which could be a hindrance to our target of annual defence production of USD 25 billion by 2025. Modernisation and border infrastructure development, the two most important pillars with a futuristic outlook in the defence budget, occupy only about 27% (Rs 1.62 lakh crore) of the total outlay, registering a modest increase of 16% from last year’s 1.52 lakh crores. Considering rising oceanlinked threats, the capital budget outlay of 0.52 lakh crore (a 10.6% hike from previous years) for the Navy is clearly insufficient in propping up procurements of Rafale-M jets and Project- 75I. The budget also did not make provisions for a dedicated non- lapsable Modernisation Fund for Defence and Internal Security (MFDIS) as recommended by the 15th Finance Commission for the long term goal of military modernisation. Non-utilisation of allocated funds for modernisation is a riddling issue for the armed forces. However, on a promising note, we see a reduced gap between used and unused funds from 2014-15 (45%) to 2022-23 (1.5%). The priorities for India’s defence budget 2023 seems to have been in the right place with regards to improving military modernisation and border infrastructure. However, with a modest increase in allocations, the envisioned future could fall short, especially given our security dimensions in the borders in perpetual flux. Sharon Susan Koshy is a Research Associate at Centre for Public Policy Research, Kochi.

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