Defence in fiscal straitjacket

The total defence allocation for the financial year 2018-19 is a reasonably substantial amount of Rs 404,364 crores ($63 billion) and this is a little under a quarter of total budgeted government spending for this year. This amount also includes a sizable pension bill of Rs 108,853 crores and amounts to 2.16 per cent of the estimated national GDP. For the record, the pension bill covers both retired uniformed personnel and their civilian counterparts who are paid from the budget head of the Ministry of Defence.

If the pension allocation is not included, then the actual amount budgeted for defence-military alone shrinks to Rs 295,511 crores and this works out to 1.58 per cent of the GDP, which is the lowest ratio since the 1962 debacle with China. In an unusual departure, the Finance Minister did not announce this sizable fiscal allocation in his budget speech and the details were made available later. As trend-lines go, over the last decade, from 2009-10 to 2017-18, the defence allocation (minus pension) as a percentage of GDP has declined from 2.19 to 1.65 per cent. This now stands at 1.58 per cent.

The Indian defence allocation is traditionally divided into two components – the revenue and the capital. The former relates to the standing costs of maintaining and training a military of over 1.2 million personnel; and the latter, the capital pertains to the modernisation and acquisition of military inventory.

In the current allocation for defence, the revenue component is Rs 1,95,947 crores, while the capital expenditure has a provision of Rs 99,564 crores. Compared to the budgeted estimate (BE) for the year 2017-18, the actual amount spent, also referred to as the revised estimate (RE) is Rs. 279,003 crores – an increase of Rs 4,889 crores from the BE. While the capital component appears to have been almost totally spent (an unusual yet positive development), the revenue component has increased and the defence pensions by Rs 9260 crores.

Thus, the broader orientation of the defence allocation for the current fiscal year indicates that the overall outlay as a percentage of GDP is declining since the government of the day has prioritised other sectors of government spending. Within this allocation, the costs that accrue to maintain and train a million-plus military and cater to the pensioners will increase progressively, thereby reducing the capital component of the defence budget. This pattern is tantamount to a fiscal straitjacket that successive governments have not been able to effectively review and recast.

In the current fiscal, the total pension allocation of Rs 108, 853 crore is greater than that allocated for the capital – which is Rs 99,654 crores. To tighten the screws on the straitjacket, more than 80 per cent of the capital allocation of this year has already been committed to for major inventory acquisitions of previous years. In short, like Old Mother Hubbard of yore, Defence Minister Nirmala Sitharaman’s cupboard is near bare and major platform acquisition projects will be pushed down the road.

India’s national security, which does not include the state police forces (who are budgeted for by individual states) is met by the fiscal allocation to two major ministries, the Defence and Home. The central armed police forces (CAPF), the Delhi Police and the intelligence agencies are supported by the Home allocation and in the current fiscal, the allocation is Rs 92, 680 crores.

In summary, Rs 497,044 crores ($77.6 billion) is what the government spends for a largely manpower-intensive uniformed forces – both military and police – to ensure national security. On current evidence, it does not appear that any radical structural changes will take place in the management of national security and the existing stove-pipe template will continue – by sheer force of habit, the logic being, ‘if it ain’t broke, don’t fix it’.

How effective this capability is came under scrutiny both at Doklam and in Uri-Pathankot over the last two years. A less myopic approach to negotiating the fiscal straitjacket is called for to create wiggle- room in a graduated manner.

Two strands that merit exploration are the greater induction of technology across the board in national security – to reduce manpower, which is the trend in most developed nations; and the second is to re-visit the proposal to enable lateral induction from the armed forces to the CAPF-s and the local state police.

More than four decades ago, this proposal for enabling below-officer cadres who complete their colour service after 15 years and are eligible for pension thereafter was examined and the Balaram committee had made some valuable recommendations. By allowing lateral movement from the military, the CAPF-s and state police would have the benefit of highly skilled and already trained personnel and the pension allocations would begin only at the normal retiring age – which is closer to 60 years, for non-military personnel.

However short-sighted turf warfare torpedoed this proposal and a diffident political leadership allowed this to fade away. In much the same manner, the induction of technology for national security has been done in a piecemeal manner and the truly effective structural changes remain elusive.

The Kargil Committee report tabled in Parliament in 1999 during the NDA I dispensation made some sterling recommendations about how to re-wire the framework and management of national security but this has been mired in political and bureaucratic indifference. Hence, for the near future, the straitjacket syndrome will continue. Watch this space next year – it will be much the same pattern!

The author is a former Commodore in the Indian Navy