De-cluttering the defence budget - Broadsword by Ajai Shukla - Strategy. Economics. Defence.

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Thursday 2 February 2023

De-cluttering the defence budget

One little factoid debunks any contention that defence is adequately funded: The defence budget, including pensions, has for the first time in decades, fallen to below two per cent of the GDP


By Ajai Shukla

Business Standard, 3rd Feb 23


In varied statements in public speeches and through press releases, Defence Minister Rajnath Singh has propagated the message that the armed forces are adequately funded. He says that sizeable increases in the defence allocations ensure that the military’s manpower, weaponry, equipment and infrastructure are at the levels needed for taking on two-and-a-half adversaries – viz. China, Pakistan and internal turmoil in hotspots such as Kashmir and Manipur. But Mr Singh’s effort is given the lie by one simple factoid: The defence budget, including pensions to 25-30 lakh veterans, has for the first time in decades, fallen to below two per cent of the Gross Domestic Product (GDP).


This might be a reasonable funding level for a country whose leaders have employed diplomacy to cultivate a cordial and cooperative regional environment. But not for a country whose second-most influential leader has challenged its most powerful rivals by threatening to snatch back disputed territory. To threaten China and Pakistan thus, and then to sharply cut back on military funding bespeaks a remarkable trust in Beijing and Islamabad that is not evident in anything they say or do.


Meanwhile, numerous statements about the defence allocations are designed to deceive, to give the common citizen the impression of a security that is, in fact, ephemeral and which our powerful adversaries can end whenever they like. 


“Defence gets Rs 5.94 lakh crore in Budget 2023-24, a jump of 13 per cent over the previous year,” says one defence ministry statement. Left unsaid is that this comparison is with last year’s budget allocations. However, when we compare the 2023-24 allocation with a more recent figure, such as the revised estimates for this year, the rise in the defence budget turns out to be a mere 1.5 per cent.

Similarly the defence ministry announces: “Capital outlay pertaining to modernisation and infrastructure development increased to Rs 1.62 lakh crore; [which is] a 57 per cent rise since 2019-20.” This glosses over the fact that, compared to last year’s capital budget allocations of Rs 1.52 lakh crore, this year’s capex allocation represents a raise of barely 6 per cent. This is a wholly inadequate rise, given the prevailing macro-fiscal environment of high inflation and a falling rupee. None of this finds mention in the budget documents.


Ultimately, the defence capital allocations are a subset of the capital investment outlay in the Union Budget. In the 2023-24 budget, the capital investment outlay has risen steeply for the third year in a row by 33 per cent, to Rs 10 lakh crore, which is 3.3 per cent of the GDP. While the defence capital allocations have risen to Rs 1,62,600 crore, they are still not quite in tandem with the Union capital allocations.


A second problem is the apparent lack of consideration with which capex funding is distributed between the three services. The allocations should be made on the basis of roles assigned to each service, with these functions flowing from a National Security Strategy (NSS) formulated at the highest planning levels.


For example, if the NSS explicitly stipulates that India should take on the role of safeguarding the global commons (freedom of navigation and overflight, piracy and maritime terrorism) in the Indian Ocean Region (IOR), that would lead to conclusions about the kind of warships the Indian Navy would require; what objectives and targets the Indian Air Force might need to reach and strike; and what amphibious assault capability would be essential for such a task. The NSS would also determine whether the Indian military would go it alone, or in partnership with other navies, or in partnership with friendly navies in the IOR and alone on the Himalayan land frontiers. That would develop decisions about the communications satellites we would need to position, what long-range missiles would need to be deployed in support and what adverse developments might require turning to partner countries to counter. In other words, if India decides to take on an expeditionary role in the IOR, that would require an entirely different strategic and tactical orientation, which would in turn require different equipment and training profiles.


Based on such calculations, each service would determine what equipment it should acquire – whether from partner countries, or indigenous manufacture, or on lease when the equipment is actually needed for training or operations. That would require an overall procurement schedule, with each service allocated funding to match acquisition timelines. For example, if it was felt necessary to develop the capability to dominate the Southern Indian Ocean, the planning staff might determine it essential to acquire two 65,000-tonne aircraft carriers along with six nuclear-propelled attack submarines. That would generate a payment timeline, which would require the defence ministry (in coordination with the finance ministry) to make available to the navy the resources for making annual payments. 


A similar calculus would determine allocations to the army and air force for equipment needed to meet NSS objectives. After all such payments – they are termed “committed liabilities” – are made, the newly created tri-service headquarters, under the chief of defence staff (CDS) would determine priorities for procuring other arms and equipment. Since payments for defence weapons and equipment are usually made over a 5-10 year period, payment tranches are largely predictable. However, as seen from the chart, the three services are traditionally allocated capital budgets that vary unpredictably.


A third feature that the Union Budget brings to mind is the need to complete the National Democratic Alliance government’s reform of the budgetary documents. Beginning with reducing the number of Demands for Grants from about six-to-seven, Mr Arun Jaitley, Mr Manohar Parrikar, Ms Nirmala Sitharaman and now Mr Rajnath Singh have transformed what used to be an unreadable mish-mash into sets of allocations that are linked by logic. Even so, there is work to be done: For reasons unknown, the budget of the Coast Guard, which operates under the navy for coastal security in peace and for operations in wartime, forms a part of the defence ministry budget (Demand No.19), rather than of the services’ revenue budget (Demand No.20) and services capital budget (Demand No.21). Similarly the budget of the Jammu & Kashmir Light Infantry, which is a regular infantry regiment, is also in the ministry’s budget. The Border Roads Organisation (BRO), which earlier came under the Ministry of Road Transport and Highways, has sensibly been brought under the defence ministry, given the strategic nature of the roads it builds and the tough terrain it operates in. However its budget allocations are spread messily all over the budget; it would be sensible to allow it its own Demand for Grant, or to consolidate its allocations coherently. Similarly, it would be sensible to consolidate the Defence R&D Organisation budget further.




Distribution of Capex budget between services


Financial Year

Services’ Capital Budget (Rs crore)

Capex Allocation (in percentage)



Air Force









































2021-22 (Actual)





2022-23 (RE)





2023-24 (BE)





(Source: Budget documents)





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