Stat Based Story: Defence Budge and Big Picture

DEFENCE BUDGET AND THE BIG PICTURE

A strong and capable military serves as a deterrent against any hostile intentions. The current situation at the borders during the pandemic should motivate us to overcome obstacles.

The previous year has been challenging for the entire world, with the Covid-19 crisis causing unprecedented death and suffering. The global economy also experienced a significant downturn, which will take a long time to recover from. In addition to these difficulties, India faced an extra challenge in the form of China's aggressive actions in Ladakh, attempting to change borders amidst the ongoing pandemic. This has led to a substantial deployment of troops, weapons, and platforms on both sides of the Line of Actual Control (LAC), and this situation is expected to continue.

Considering these circumstances, it was widely anticipated that the defense budget would be increased this year. The budget was raised from 4.71 lakh crore to 4.78 lakh crore, but the increase is not significant in absolute terms and only covers inflation.

Given the overshadowing impact of the Covid-19 pandemic, there are competing demands, with a strong focus on healthcare as a top priority. It is understandable why the government may not be able to allocate more funds for defense needs.

However, it is essential to recognize that our security challenges cannot be ignored. So, how do we address this? Can we explore innovative solutions beyond just numbers? Firstly, within the allocated budget, is there a way to rebalance the requirements for modernization, day-to-day operations of the armed forces, and pension expenses? This would involve smart spending and optimizing existing resources to the fullest. Secondly, since the available funds are limited, we should explore unconventional and creative approaches to optimize existing resources. Finally, is there any potential to generate additional funds through previously un-attempted means?

The defense budget comprises capital and revenue components. A significant issue has been the disproportionately high revenue expenditure due to the labour-intensive nature of the armed forces. For example, pensions accounted for 1.33 lakh crore last year, making it the second largest component after the revenue head. 82 percent of the army budget is allocated to revenue expenses. Among the revenue expenses, the pension bill is the largest constituent.

To achieve smart spending and obtain greater value for the money spent, there are several measures that can reduce the revenue expenditure of the defense budget. First, there is a proposal to increase the retirement age in selected categories, which would gradually reduce the revenue budget. Second, there has been a long-standing demand to enable lateral absorption of soldiers into other departments or forces since they retire early. This would reduce the burden of the pension bill while providing disciplined and trained manpower. Right-sizing the armed forces is also being pursued through ongoing integration efforts, which may take time but will eventually decrease the revenue expenditure.

Exploring a new officer entry scheme called "tour of duty" is another option under consideration. This scheme would not only reduce salary and pension expenses but also attract talented individuals for shorter durations. It could also help engage domain experts in high-tech areas like cybersecurity and space, where fresh perspectives are beneficial. Lastly, there is merit in exploring alternative financial engagement models, such as leasing rather than outright purchasing, as recently permitted for defense platforms.

 

Considering India's two active borders with nuclear-armed neighbours, modernization of the armed forces is crucial and cannot be overlooked. Capital budget allocation will always be a challenge for a developing country like India. Therefore, we should explore the feasibility of generating funds and accessing lines of credit. One potential measure could be the monetization of selected parcels of land. It is important to note that this suggestion refers to land outside the cantonments and defense establishments. Monetizing such land could support modernization efforts, enhance combat potential, and ultimately save the lives of soldiers. Additionally, there is potential for defense public sector units (PSUs) and ordnance factories to generate revenue and enhance their outputs through joint ventures with the private sector. These suggestions require experts to identify the way forward.

There have been positive developments in this regard. The government has accepted the Finance Commission's recommendation for a non-lapsable capital outlay for modernization. The Finance Commission has also proposed a non-lapsable fund worth Rs 2.38 lakh crore for defense modernization from 2021 to 2026. This commitment to modernization will greatly assist the armed forces in executing a well-planned and stable modernization strategy.

During the budget speech in parliament, the finance minister did not mention the defense budget explicitly but informed about the allocations. As an optimist, this can be seen as a symbolic gesture indicating that the security of the country is priceless, and whatever is required for defence will be made available as stated by the government from time to time.

 

JAI HIND (Victory to India)