Defence salary bill leaves less for new weaponry - Broadsword by Ajai Shukla - Strategy. Economics. Defence.

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Saturday 6 July 2019

Defence salary bill leaves less for new weaponry

Over the last 3 years, salaries and running costs have risen 25%, but the modernisation budget has grown by only 15%

By Ajai Shukla
Business Standard, 7th July 19

The modest 6.35 per cent rise in defence allocations – from Rs 405,193 crore in last year’s revised estimates, to Rs 431,011 crore in Friday’s budget – presents an even more worrying picture when the budget is disaggregated.

A Business Standard analysis of the defence budget in a three-year window indicates that most of this scanty rise is accounted for by the revenue heads of manpower and running expenses. Meanwhile, the important capital budget component, which funds equipment modernisation, has grown significantly slower.

From the baseline of the 2016-17 budget to the present, three annual increments have raised spending on the three services by a total of 23 per cent. During this period, allocations for manpower (including salaries and pensions) have grown by 26 per cent, while running costs have grown by 25 per cent. In comparison, the capital budget has grown by only 15 per cent, averaging barely four per cent each year.

This factors in allocations made to the army, navy, air force and coast guard; but not to the defence ministry, the Ordnance Factories (OFs) and the Defence R&D Organisation (DRDO). It also assumes the defence budget will be spent in full this year, rather than returning a part of it unspent, as has happened in preceding years.

Government sources argue this year’s capital allocation of Rs 108,248 crore cannot be increased further, since it already accounts for one-third of the central government capital expenditure of Rs 3,38,569 crore.

Defence industry executives also underline a compensatory factor: the benefits of customs exemption that Finance Minister Nirmala Sitharamanannounced on the import of defence goods that are not made in the country. This will make defence imports cheaper by 10.3 per cent, which is the basic customs duty, and effectively increase the capital allocation by 5.15 per cent, assuming half of all capital procurements are imported.

Effectively reduced by 10.3 per cent will be the prices of Rafale fighters, P-8I maritime patrol aircraft, naval helicopters, Apache and Chinook helicopters from the US and S-400 missile systems, Krivak class frigates and a nuclear submarine in the pipeline from Moscow.  

There is uncertainty over who will control the DRDO’s research budget, which amounts to Rs 10,484 crore this year. In her budget speech, Sitharaman announced that the government proposed to establish a National Research Foundation (NRF) to “fund, coordinate and promote research in the country.”

“NRF will assimilate the research grants being given by various Ministries independent of each other”, she said. It is unclear whether the DRDO budget will be subsumed under this.

Besides the DRDO’s research budget, the government allocated Rs 95 crore towards “Make” category projects, which involve Indian companies developing complex defence platforms. Last year, the defence budget had allocated Rs 142 crore under this head, but the revised estimates brought it down to Rs 2 crore, indicating that the money had remained unspent.

The budget has dissatisfied all three services, who believe their role entitles them to a larger share of the defence budget. The army, by far the largest service, which is involved in counter insurgency duties year-round, notes that its share has come down over the last three years from 68.5 per cent to 66.5 per cent of the military budget.

The navy, which backstops the country’s Indo-Pacific strategy and requires more warships, wants more than the 13.75 per cent that its allocation is stagnating at. The air force, whose budget has grown by almost two percentage points, wants a larger capital budget to fund a slew of fighter purchases in the pipeline.


  1. every year you make similar analysis and every year you come to the same conclusion!!
    There will never be enough budget for capex for defence. we must live with it and plan according to this low number. there is no other way out. increasing further double digit year on year means that the petrol and diesel prices will increase to 3 digits which would be a disaster and no govt can allow. our country just does not have enough money to meet all expenses. once we go into budget surplus from deficit situation then we can have massive increase. till then you can save the text for the budget in the years ahead.

  2. Wrong analysis. It is those who are living off uniformed men causing issues...PSU, MoD civilians, middle men, we need to trim fat there.

  3. The Govt’s first of procuring more from India is on target. They are also more exports.
    Now on the money saving will have to come from efficient defence PSU.
    This will lead to enormous saving not only in capex, but also in life cycle maintenance.

    If you look at US, they treat their veterans with far more respect.
    They run a lot of research into what our MoD calls life style disorders.
    I am surprised being a veteran yourself you have not written a critique on this topic.
    Here both MoD and the finance minister should have displayed maturity.
    The topic you have written is shallow, as usual.

  4. This is all bullshit no matter what still there will be corruption some stupid deals and loss of innocent life's hai hind


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