Monthly Archives: March 2011

Defence And Strategic Affairs Blog

Rising Challenges, Declining Resources

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India’s defence budget continues to be pegged at less than 2.0 per cent of the country’s GDP despite the recommendations of successive Standing Committees on Defence in India’s Parliament that it should be at least 3.00 per cent if the emerging threats and challenges are to successfully countered.

Credit: news.xinhuanet.comIn his budget speech on February 28, 2011, Finance Minister Pranab Mukherjee set aside Rs 1,64,425 crore (US$ 36 billion) for defence during the next financial year (FY 2011-12). Though the present allocation shows an increase of 11.59 per cent over the budgetary estimates for FY 2010-11 and 8.47 per cent over the revised estimates, it is barely adequate to neutralise the annual rate of inflation. Inflation in weapons, ammunition and defence equipment is usually much higher than domestic inflation.

Of the total allocation for defence, on the revenue account the army will get Rs 64,250 crore, the navy Rs 10,590 crore, the air force Rs 15,93 billion and the Defence Research and Development Organisation (DRDO) Rs 5,624 crore. The total revenue expenditure planned for the year is Rs 95,216 crore (US$ 21 billion, 58 per cent of the budget). The remaining amount of Rs 69,199 crore (US$ 15 billion, 13.75 per cent increase, 42 per cent of the budget) has been allotted on the capital account for the acquisition of modern weapon systems, including 126 multi-mission, medium-range combat aircraft, C-17 Globemaster heavy lift aircraft, 197 light helicopters, 145 Ultra-light Howitzers and C-17 heavy-lift aircraft. It is well known that India plans to spend approximately US$ 100 billion over 10 years on defence modernisation.

Giving his reaction to the Finance Minister’s budget speech, Defence Minister A K Antony said, “We welcome it as our concerns have been by and large addressed and the Finance Minister has stated that if we have any fresh requirements, they would be made up without any difficulty.” However, while the reactions of the armed forces are not known, they are unlikely to be satisfied as their plans for modernisation have been stymied year after year by the lack of committed budgetary support. The 11th Defence Plan, which will enter its fifth and final year on April 1st, has not yet been accorded approval in principle by the government and, therefore, lacks committed budgetary support. The only silver lining on the horizon is that the funds earmarked on the capital account for FY 2010-11 have been fully spent by the government for the first time in many years.

In addition to the defence budget, the government has also earmarked adequate resources in the annual budget of the Ministry of Home Affairs (MHA) for homeland or internal security. A portion of these funds will be utilised for setting up a National Intelligence Grid and the National Counter-terrorism Centre – measures which are considered necessary consequent to the Mumbai terror strikes in November 2008. Also, funds for the modernisation of central police and para-military forces will be provided from the budget of the MHA.

This year’s defence budget is 1.84 per cent of the projected GDP and 13.07 per cent of the total Central government expenditure. China’s official defence expenditure is US$ 78 billion (3.5 per cent of its GDP) while its actual expenditure is well above US$ 100 billion. The U.S. defence expenditure was US$ 530 billion in fiscal year 2010, excluding funds allotted for the wars in Afghanistan and Iraq. In fact, the 13th Finance Commission has recommended that the nation’s defence expenditure should progressively come down to 1.76 per cent of the GDP by 2014-15. Quite clearly the Finance Ministry appears to have decided to pay heed to this advice.

Defence And Strategic Affairs Blog

India’s defense budget increase

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In the 2011 Union Budget presented yesterday in the Indian Parliament, the Finance Minister announced an 11% hike in the defense budget during the next fiscal year. India has now set the defense budget for FY 2011-12 at $36.28 billion. Forty percent of the budget would be spent on capital expenses, while the rest goes towards maintaining the Indian Army, which is one of the largest in the world.

The significant rise in defense spending could be attributed to the increasing military capabilities of India’s two immediate neighbors with whom it has fought wars previously – China and Pakistan. Over the last few years China has been rapidly expanding its defense spending, and it has grown approximately 13% annual on an average since 1989. According to some estimates, China’s defense spending in 2010 was about $100 billion. The size of its army is almost twice that of India’s and is much better equipped.

On its western border, Pakistan has been going through a rough phase of economic, political and social upheaval, while its military budget keeps increasing. Last year it increased its defense spending by 17%, partly to aid U.S. in the war on terror. This is in addition to the economic and military aid the U.S. provides Pakistan for the same purpose. Over the last few weeks there have also been news of a rapid increases in Pakistan’s nuclear arsenal, with it set to overtake Britain as the fifth largest nuclear power. Pakistan is building its fourth plutonium reactor and has more than 100 deployed nuclear weapons. Not to mention that the Pakistan Army and the ISI policies have traditionally been India-centric, with a majority of the forces deployed along the Indian border.

Under such external circumstances and the need to upgrade and procure equipments and machinery, the Indian defense spending increase seems well placed. India has a few procurement deals lined up for the year, but it would need to do a lot more to match up to China’s standards. As its primary competitor not only economically, but also for geopolitical influence particularly in East Asia and Africa, India needs to speed up and match up its defense capabilities with those of China. A strong military would be essential to counter any potential threats from an unstable AfPak region.

Circumstantially as important as it may be, the increases in defense spending of all the three countries contribute to the arms race in the region taking it to the edge of volatility. While it would not be prudent to expect a decrease in expenditures or an end to military procurements and upgrades, the three countries need to make concentrated efforts to reduce the need for the increase in military spending.