Tuesday, March 1, 2016

Slash in defense Budget, Impact on the Modernization

Slash in defense Budget, Impact on the Modernization

The budget is not impressive, that very low amount to be spend on modernization and new acquisition, out of the salaries and other expenditure, The armed forces gets only $17 billions. that's way less than the allocated $50 billions. The pensions, pay and allowances alone costs some 64% of the Budget. Which makes the armed forces are more costlier than the spending.

The armed forces are gearing up for an modernization, It's clear this is not a good year for them, while government allocates just $11 billions for capital acquisitions. the impact will shows in Rafale acquisition, MRTT acquisition, Frigates and submarine construction, naval modernization program,  Army's mountain strike corps program, Army LUH, MRH programs, MR SAM procurement and more.

In addition, If IAF signs the Rafale contract, India needs to pay nearly $1.2 billions this year, If we sign the FGFA contract, that itself costs another $1 billion. the much needed MRTT, wide body AEWCS programs remain placed in freezers. Same goes for Navy, much needed mine countermeasure vessels, Missile Boats, Submarines, follow on Frigates all put on hold. The reason behind delay's in many projects are lack of budget allocation. 

A perfect armed forces budget keeps the pensions pay and allowances below 40%, which makes cheaper expenditure on spending and more money for acquisitions. Indian Army has a strength of more than a million of strong soldiers and officers, which makes costs the armed forces keep running in high.

Rival Chinese announced last year, that PLA plans to cut 3,00,000 troops from active service, with the reason of high defense spending only on the armed forces salaries, Currently PLA has nearly 1.9 million ground troops. The US has nearly half a million ground troops and the Russians has quarter million troops. India has more than a million ground troops. 

The Indian armed forces must cut the troops by 0.7 millions in next five years. means Ministry needs to cut one lakh of Soldiers every year. In five years regular army forces number may stand somewhere between 0.6 to 0.7 million. This may change huge difference in the capital spending. 

The ministry itself want to hike the defense budget, Earlier in 1963-1988 the defense spending is more than 3% of total GDP. However nowadays it's comes below 2%. and this year if we omit the OROP from budget, It's not even comes to 2% of GDP. The government must allocates 3% GDP for defense to confront Chinese and Pakistani forces. 

However, The Indian economy increasing nominally every year, without inflation India may touch $5 trillion economy in 2020. which gives nearly $100 billions of defense spending even if we spend 2% of GDP. 

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