India's steepest defence budget hike ever
ON 15th of February 2009, India announced her defence budget for the financial year 2008-09 for Rs.1,056 billion estimated roughly at about US $ 26.6 billion to fund a mammoth modernisation programme for the 4th largest military of the world. Although this hike is about 10% compared to India's budget for 2007-08 but this is the steepest hike of Indian defence budget since the partition of the subcontinent. This boosting of expenditure has been justified due to crossing of a threshold and deterioration of security environment and increased defence spending by China. The budget looks impressive despite the effects of global economic slowdown and it marks an increase of nearly 125% percent over the last one decade from Rs. 47,071 crores in 1999-2000. Indian defence analysts feel that to meet any threats to its vital interests India requires among others, a strong military capability that could safeguard its interests within and outside domestic boundaries including in the vast seas that account for 70% per cent of the country's total trade by value. China has also increased its defence budget to about US $70 billion, which some observers point out that the real expenditure is much more than the announced budget. Point to note that Bangladesh's total national budget for the year 2008-09 was only Tk. 999.62 billion. The Indian defence budget is usually sub-divided into the revenue and capital heads. Of this, the revenue budget caters for the expenditure towards pay and allowances, training and annual establishment costs towards maintaining a standing military of under 1.23 million uniformed personnel consisting of a million plus Indian army, 100,000 plus air force and 60,000 plus navy. Given the manpower intensity of the total Indian military - the revenue expenditure is closer to 60 percent and the balance is spent towards capital costs and defence research and development. The capital component gives an indication about what kind of modernization and new acquisitions are in the Indian military pipeline. In this year, 2008-09, the capital outlay has been increased to Rs.480 billion for the purchase of military hardware, as opposed to pay, pensions, maintenance, and the other expenses of running a military. That's a rather sharper hike of almost 23.3% over 2007/08. The Armed Forces was also allocated Rs. 960 billion in 2007-08 and it was finally reduced to only Rs. 925 billion - meaning that the Indian defence ministry had returned Rs. 35 billion as unspent during 2007-08.This is anomalous given the critical need for modernization of inventory for all the three forces. It is this drawback that has not been addressed by the Indian beaureucratic tangle so far. Analysts estimate that the defence spending will increase by more than a third to Rs. 1,417 billion (US $ 32.7 billion) in fiscal year 2009. This figure represents a 34.2 per cent increase from the proposed 2008 budget of Rs. 1,057 billion and the allocation is nearly 15 per cent of the government's total interim budget of Rs. 9,532.31 billion for the fiscal year beginning on 1 April 2009. Indian defence minister said that top priority must be given to the modernization of the Armed Forces and half of the defence budget should be allocated for the purchase of new military equipment. The modernization of armed forces has become a global trend and India must also assume a new approach taking into account a variety of threats to its national security. The Associated Chambers of Commerce and Industry of India said in a report last year that over the past three years, India had spent as much as $10.5 billion on military imports, making it amongst the largest arms importers in the developing world. India has imported military hardware worth US $28 billion since 2000. The Indian Armed Forces is scouting global arms industry for helicopters, artillery, armour and infantry gadgets, received the largest share of the budget, with an allocation of US $11.79 billion including unspecified millions of dollars to set up institutions and schools for families of servicemen and women. The air force is almost nearing a contract on the purchase of 126 warplanes and was allotted US $2.86 billion. Six global aerospace firms are competing to vie for the fighter jet deal which mentions that India will buy 18 planes by 2012 and locally assemble the remaining units under licence at a state-run facility. The navy, long embroiled in a deal with Russia over an aircraft carrier, was allocated US $1.85 billion dollars and is shopping for six submarines in addition to the six it bought last year from Armaris and European defence firms for $3 billion. The 137-ship navy is also in advanced negotiations to buy eight long-range reconnaissance planes from either US-based Boeing or the European consortium EADS for $2 billion, besides building a nuclear-powered submarine. It is also building nuclear submarines for $2.9 billion and spending an additional $1 billion on a domestic weapons development programme. Funds have also been earmarked for research development and ordnance factories which are in the process of deploying India's guided and ballistic missiles that can carry nuclear warheads. The remaining would fund wages, pensions, military research and sundry expenses. The Defence Minister Mr. AK Antony hailed the budget and said that the armed forces had been hit by a resource crunch in the 90s and now time has come to equip them with latest weapons and systems to ensure that country's borders are safe. The budget promised the armed forces would not face fund shortages in the drive to upgrade material and any further amount that is needed for the defence forces, especially for capital expenditure, will be provided. The modernization would be across the board in all three services army, navy and air force as well as in the country's strategic programmes like missiles and nuclear submarines and indigenous aircraft carrier. Also, India for the first time set aside $125 million to be spent on the "urgent needs of development of border areas" such as Arunachal Pradesh state, which is claimed in full by China. India also plans to spend another US $30 billion by 2010 which includes US $3.5 billion for 700 helicopters, 155mm howitzers, 1.5 billion dollars for AWACS/long range maritime reconnaissance aircraft and an unspecified amount for drones, mainly from Israel. However, analysts pointed out that the funds might not suffice to meet the long-term modernization programme as the 10 percent increase will barely offset nearly five percent inflation rate and 40 percent funds will go for the upkeep of assets and existing manpower. The unprecedented increase is likely to be closely monitored in Pakistan which has accused nuclear rival India of sparking an arms race by spending almost three percent of GDP on its million-plus military forces. India says that its long-term rivals, Pakistan and China, allocate around 3.5% and 4.3% of GDP to defence, respectively. Analysts after a regional survey of military balance reveals the increasing advantage of India's neighbours, especially for China due to its double digit growth, defence expenditure for more than a decade, has resulted in China developing its own IT- and space-based capability. Mild alarm bells have rung in different countries over the Chinese defence allocation and this stems from the opacity that surrounds Beijing's budgetary process for the officially stated Chinese figure is perceived to be less than the actual spending on defence. At the same time Pakistan's military modernisation, especially with American military assistance by transferring fighter planes, missiles, bombs and surveillance technologies, has direct security implications for India, and narrows the advantage in conventional warfare that were in India's favour for long. Analysts from India say that to cope with these security imperatives, the present allocation seems inadequate, given the fact that most of the outlays in the budget for modernisation cater for projects signed years earlier. This means, the present budget leaves little that could be used to enhance military capability, meet the security threats in the neighbourhood and technological developments elsewhere. But experts said a slow bureaucratic process could still delay modernisation efforts as it seldom spends its entire budget allocation for defence because of red tape associated with arms purchases and unless it clears pending deals faster, the budgetary allocation would not make any difference. However, analysts agree that there was a positive intent to spend more on defence after the recent militant strikes and the budgetary allocation was a reflection of that change in India's attitude.
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