Budgeting for defence


India’s defence budget which is less than three per cent of its GDP, is woefully inadequate, says Dr. P.M. Kamath, especially given the threats we face on the twin fronts of Pakistan and China. Can this budget be increased?

India has a budget that used to be introduced on the last day of February every year. For the first time, the current budget for the Fiscal Year (FY) 2017-2018 was presented on 1 February 2017 and approved by the Lok Sabha before the commencement of the new financial year on 1 April. Next year onwards, it is likely that the budget might be cleared in the month of January.

A unique feature of the annual budget and its final approval is the highest exclusive prerogative of the elected representatives of the people. In brief, it has its origin in British people’s refusal to pay taxes without approval by the people’s representatives in the House of Commons. That in turn had its origin in ‘no taxation without representation.’

The Indian defence budget
Though defence constitutes an important charge on the national budget, there is no separate defence budget as such; it is an important segment of the national budget. Let us examine the trends in defence allocation in Indian democratic governance. There is a generic distrust of armed forces amongst India’s early policymakers after Independence. In retrospect, in the period soon after Independence, in the general context of the developments in Afro-Asian countries at that time, where military generals had assumed political power in quick succession, as for instance, in Egypt, Indonesia and Pakistan etc, probably, skepticism was good for the health of Indian democracy. But now even after 70 years of Independence and self-governance, skepticism seems to have become a negative factor as a pre-assumed and unquestioned axiom in national security policy making. If this trend is not changed, it is likely to affect the defence of the country.

Over the years, as fallout of the above observation, the defence ministry’s top echelons are occupied by IAS (Indian Administrative Service) officers, who claim to have knowledge of everything under the Sun, from Agriculture to Zoology (A to Z), obviously D for Defence, F for Foreign, N for National, P for Policies and S for Security come in-between! Many security experts had recommended making a beginning by associating defence personnel at the higher levels of policy making, and also creation of a Chief of Defence Staff (CDS).

After the Kargil War of 1999, the K. Subrahmanyam Committee had recommended the creation of a CDS position as a single point of defence authority in place of the present service chiefs, for coordination and consultation. Nothing has come out of it, so far. Prime Minister (PM), Narendra Modi had come into office by promising to reform foreign/security policymaking by involving, what Americans call, ‘in-and-out’ system under which, ministers to be advised by experts associated with the party-led-think-tanks; whenever party complexion changes, a new set of advisers comes in with the new ministers.

Expenditure over the years
In India, the level of defence spending has been low always since Independence with a few exceptions, which I will discuss a little later. Since every leader is conditioned by the international environment in which he nationally operates, our first PM, Pandit Jawaharlal Nehru had an intellectual disdain towards men in armed forces; he was also fearful of the military taking over power in India, same as nations which had newly won their Independence, just like India.

Thus, it is a safe statement to make that successive governments, have provided only a limited budgetary allocations. Between 1950 and 1962, in terms of the percentage of a nation’s GDP (Gross Domestic Product), it was hovering around 1.83. But after the Chinese aggression in October 1962, it went up to 2.56. It was only under Rajiv Gandhi that it was further raised to 2.83 per cent of GDP during 1984-85 and 1985-1986. During his later years – 1986-87, 1987-88 and 1988-1989, it was 3.32, 3.34 and 3.14 respectively.

The current features are in keeping with the budgets of earlier years. In dollar terms, the UPA (United Progressive Alliance) II had provided in their last budget for $37.86 billion. They had made a provision in the interim budget for $36.13 billion. NDA II inherited the UPA II made interim budget in 2014-2015. For the current FY, 2017-18, Rs. 359,854.12 crores has been set aside, inclusive of pensions. It does not even meet annual inflation and depreciation of the rupee. It constitutes 1.56 per cent of the GDP.

Increase in the budget allocation?
Any sudden increase in the defence budget is likely to send an adverse message to our neighbourhood, and beyond to our international community that India is preparing for some military action. Under such circumstances, we need to take initiatives to inform our friends and foes about the grounds for our actions. Thus, during the Chinese aggression, Pandit Nehru trying to maintain his policy of nonalignment sought urgent military assistance as well as purchases for preparing Indian armed forces for any border conflict in future with China – particularly from the US and Israel. In the aftermath of the October 1962 war, there was gradual but clear collaboration between China and Pakistan on principle of the enemy’s enemy is a friend – as a result, India has been accepted as a state facing two-pronged security threat.

On the other hand, when Rajiv Gandhi increased defence allocation and went in for developing a blue water Navy, Australia raised hue and cry as to the intentions of the Government of India. The saving feature then was the perception in the US and the West that Rajiv was, unlike his mother, favourably inclined towards them. That in turn, made the US refer to India as an emerging major power. This was borne out by the Indian use of its Army in 1987 to save Sri Lankan President Jayawardhane from a military coup in the face of the LTTE threat there, and India’s use of its Navy in 1988 to save the Maldivian President Gayoom from a military coup and restore him to presidency.

The later years saw a decline of defence allocation below three percent. Economic bankruptcy reached under successive UF (United Front) governments and later under Prime Minister Narasimha Rao, Atal Behari Vajpayee and Manmohan Singh, the allocation for the armed forces never reached anywhere near to three percent of the GDP. On the other hand, during Singh’s last two years, in 2011-12 and 2012-13, it declined to 1.83 and 1.93 percent of the GDP, respectively.

Indian PMs since Indira Gandhi have emphasised the need for the upgradation of technology used in defence, under the slogan of self-reliance. Yet, very little has been achieved in practice. During the last few years India has retained the tag as the highest importer of weapons from foreign sources. A nation that is dependent on imported weapons or technology without arrangement for its transfer, is unlikely to be a winner in any likely conflict.

It is this aspect of defence that has prompted PM Modi to speak in terms of ‘Make in India.’ But such production in India takes enormous time. Thus for instance, India had agreed to have six French scorpene-class submarines built in Mazgaon Dock Ltd., in Mumbai in 2005, but in the last 12 years, only two have been built. Such undue delays defeat the very purpose of ‘Make in India’.

Defence budget and preparedness
Threat perceptions of policymakers at a given time govern the determination of budgetary allocations, since national security is the first priority in the determination of budget. These perceptions are often exaggerated by the non-democratic systems; budgetary allocations are not fully reflected in the budget as some amounts are camouflaged under some innocuous headings. This could happen even in the democratic systems. But increasingly, a growing sense of accountability in governance, and under the constant fear of Right to Information (RTI), things are changing, albeit slowly, in democracies.

Generally stated, there is an urgent need to increase defence budget provisions. India continues to face twin threats from China and Pakistan. Like India, Pakistan has acquired nuclear weapons. Its nuclear deterrence should help Pakistan to maintain a budgetary equilibrium with India. Yet, it spends 3.4 percent of the GNP (Gross National Product): China is another headache for defence policy makers. It is also a nuclear weapons state which is 34 years ahead of India in the development of nuclear and missile technologies. It has a defence budget that is 2.5 times larger than that of India. Hence, the Defence Committee of Parliament headed by the BJP MP Major General (Retd.) B. C. Khanduri, asked for allocation of three per cent of the GDP on Defence. But it is also to be noted that only an increase in GDP growth will enable government to allocate more funds to defence.

It is also a fact that defence funds allocated are not always fully spent, for instance, the Defence department could spend only 85 per cent of the total allocated amount in FY 2015-16. Another reform is urgently needed to make funds allocated to defence purchases are transferred on a non-lapsable basis, as in Indian democracy procedure for defence acquisition is a cumbersome, time consuming process. In the absence of such an innovative procedure, the nation’s programme of modernisation will certainly suffer.


Dr. P.M. Kamath

Formerly Professor of Politics, University of Mumbai with specialization ranging from national security, peace, security, foreign affairs—Indian and American, and International politics & currently Chairman and Hon. Director, VPM’s Centre for International Studies, Mumbai, affiliated to Mumbai University. He is also an adjunct Professor, in Department of Geopolitics and International Relations, Manipal University, Manipal.