the day after the bush visit, china announced it was increasing its defense spending by 15%. coincidence? also, it is believed that china's actual defense spending is about twice as much as it concedes, anyway.
meanwhile, back at the ranch, india *reduces* defense spending rate.
this gives me a great feeling of confidence that the UPA has china's... oops, india's best interests in mind.
Declining defence budget
Gurmeet Kanwal http://www.observerindia.com/analysis/A579.htm
In the Finance Bill introduced in Parliament on February 28, the budget
estimates (BE) for defence have increased marginally from Rs 83,000 crore in
2005-06 to Rs 89,000 crore for 2006-07 - a rise of about 7 per cent. With
inflation ruling at 4 to 5 per cent, the real increase in current rupees is only
of the order about 2 per cent.
This is grossly inadequate to undertake any real modernisation, especially
because the annual rise in international prices of weapons, ammunition and
defence equipment is usually 10 to 12 per cent. If the rupee fails to hold its
own against the US dollar and the euro in the year ahead, the situation will be
By whichever parameter one examines the allocations made for defence, the
results are found to be dismal and are sometimes depressing. As a percentage of
the GDP, which itself grew at the breath-taking pace of 7 to 8 per cent per
annum for a country of India's size and population, the defence budget steadily
came down from 3.59 per cent of the GDP in 1987-88 to 2.30 per cent in 2004-05
and appears to have now stabilised at about 2.5 per cent.
China and Pakistan, India's major military adversaries, with whom India has
unresolved territorial and boundary disputes, both spend 5 to 7 per cent of
their GDP on national security. The 11th Finance Commission, a constitutional
authority, had suggested that defence expenditure should go up progressively to
at least 3 per cent of the GDP by 2004. Parliament's Standing Committee on
Defence had recommended in the mid-1990s that defence expenditure should be
raised to a level of 4 per cent of the GDP for serious modernisation efforts.
The average defence expenditure was pegged at 16.48 per cent of Central
Government expenditure during the decade of the 1980s. This share came down to
14.63 per cent in the next decade up to the turn of the century. Similarly,
defence expenditure as a ratio of total (Central plus state) government
expenditure came down from 10.5 per cent during the 1980s to 7.75 per cent
during the 1990s, a period during which the rupee depreciated against the dollar
from about Rs 16 to a dollar to Rs 46 to a dollar.
Taking inflation of 7 to 8 per cent also into account, the defence budget
declined in terms of constant rupees by over 10 per cent per annum. Quite
obviously this led to a decline in India's conventional defence capability and
preparedness and emboldened Pakistan to launch its ill-fated intrusions into the
Kargil sector of Jammu and Kashmir in May 1999.
The request for allotment of funds projected by the three Services every year is
routinely pared down by the Ministry of Defence (MoD) in the projections that
the MoD makes to the Ministry of Finance (MoF). The MoF treats the projections
as a wish list and reduces them further by an average of almost 25 per cent.
During 2004-05, the Services projected a requirement of approximately Rs 103,000
crore; the MoD reduced it to about Rs 87,000 crore; the MoF's BE allocation was
Rs 77,000 crore, a shortfall of 26 per cent. This reduction is effected
arbitrarily and without consultation so that almost till the day of the budget,
the Services are uncertain of their likely budgetary allocation for the next
It is unbelievable that such a situation should exist after half a century of
experience with five-year plans and defence planning. It is clearly indicative
of the disinclination of successive governments to closely involve and integrate
the senior leadership of the armed forces in national security decision-making
and does not augur well for long-term perspective planning.
The worst impact of the steadily declining defence budget in terms of inflation
and foreign exchange fluctuation adjusted constant rupees is on the
modernisation plans of the armed forces and the replacement of obsolescent
weapons systems and equipment. The ongoing revolution in military affairs (RMA)
has passed the armed forces by. The Indian Army, for example, is a first-rate
fighting force that is armed with second-rate equipment - ready to fight battles
of the early 20th century.
The Army desperately needs new 155 mm self-propelled and towed guns and the Air
Force must replace its obsolete MiG-21 aircraft with more modern
As if this was not bad enough, a large chunk of the funds earmarked for capital
expenditure, which goes towards modernisation, is surrendered year after year
due to bureaucratic red tape and the fear of strictures being passed by the
Central Vigilance Commissioner for tardy procedures.
An average of as much as 14 per cent of the budgeted amount, varying between Rs
5,000 and 9,000 crore, remained unspent every year from FY 1999-2000 onwards
till this was arrested in 2004-05. This year, 2005-06, the revised estimates
(RE) figures are lower than the BE figures by the unspent amount of Rs 1,300
The only reasonable conclusion that can be drawn is that the successive Finance
Ministers have been using the defence budget as one of the tools to manage their
The steadily declining defence budgets in terms of constant rupees are gradually
degrading national security capabilities. The continuous involvement of the
armed forces in various operational commitments and the almost complete lack of
genuine modernisation are undermining preparedness for war and eroding their
conventional edge. With the economy growing at the compound rate of 7 to 8 per
cent annually, surely the nation can afford to invest 3 to 3.5 per cent of its
GDP as an insurance premium for national security, especially when a huge amount
of over Rs 100,000 crore is earmarked for wasteful subsidies that seldom reach
the poor for whom these are intended.
The governments of the day, whether it was the previous BJP-led NDA government
or the present Congress-led UPA government, have failed to show the concern and
political courage necessary to safeguard national security interests by making
adequate financial provisions for the modernisation of the armed forces. This
can only be termed as gross dereliction of duty.
The writer is Senior Fellow and Director, Institute of Security Studies,
Observer Research Foundation (ORF), New Delhi.