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. 

Surprise, $50 billions for Defense

Surprise, $50 billions for Defense

The finance minister announced a whooping $50 billion defense budget with an average hike of 20% from last year, however the increased amount will be spend on the OROP pension bill only, and defense minister gives up nearly $1.5 billion unspent amount from last years budget. the pension bill alone costs some $11 billions, which gives nearly $39 billion for armed forces.  

OROP and Arrears	82,000 cr	$12 b
Capital Acquisition	78,587 cr	$11.4 b
Salaries and Allowances	1,43,869 cr	$21.1 b
Other Expenditure	37,400 cr	$5.5 b
Total	3,40,922 cr	$50 b

It's a major backdrop in the defense budget is the huge cut in capital acquisition funds, the funds who used to buy new defense hardware's from abroad and from Indian companies, this acquisition cuts comes after defense minister gives up nearly $1.5 billion unspent amount from last years allocation.

In the current fiscal year, the defense ministry allows to spend nearly $11.4 billions to buy new defense hardware's. this seems very less compared to previous budget allocation, this may further slow the defense modernization. Contracts like FGFA, AMCA engine, Construction of IAC 2 and Army MR SAM costs so much. It's highly unlikely the armed forces won't get new contracts.

Also there is no clear information available on modernization of central armed forces operating under the defense ministry, such as Coast Guard, Assam Rifles, Special Frontier Forces and Andaman Nicobar command. This seems surprise that internal security modernization details also not disclosed in the budget session.

In the $50 billions, only $38.5 billions going to be spend on armed forces, nearly $11 billions spend for pensions. the rival China spends nearly $140 billions every year, with nearly $60 billions for acquisitions. way ahead of Indian defense spending.

It's clear the defense forces remain spend more than 60% of money to the salary's, allowances and other personal expenditure's. as once Doval stated this "more manpower costs less war preparedness". Many analysts suggest the defense ministry to cut the troops number by 7 lakh. which can shave more than 20% of salaries and allowances.

There is some other concerns about controlling the attrition damage, keeping the forces maximum defense preparedness by increasing the weapon stockpiles. Many sources confirms that armed forces have ammunition for only 20 days, than the required/authorized stockpile of 40 days. the issues in storage also remain concern that CAG once found corrosion in anti tank shells stored in the reserves.