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.

The Defence Path - 2015

The Defence Path - 2015

    

With strength of over 1.3 million active personnel, Indian armed forces are the world's 3^rd largest military force and the largest standing volunteer army in the world. Indian armed forces have been involved in several military operation since independence and with increased cross border terrorism a lot has been demanded of the forces. With China racing away in numbers and technology the demand for modernizing and strengthening the armed forces has been a major issue. Right from the start the new Modi led government has meant business and has taken several steps to bolster the presence of the forces. 

       The government presented it ‘Union Budget’ for the fiscal year 2015 on 28^th February. Tabling the budget, The finance Minister has hiked the defence budget for FY 2015-16 by 9.46 per cent to Rs 2,46,727 crore, which is around Rs 23,357 crore more than the revised estimates for the current financial year that stand at Rs 2,22,370 crore.

          The armed with this would receive a increased of 7.9 % for the fiscal year than the last year. This small increase is grossly inadequate to give a boost to military modernization that has been stagnating for over a decade.  With China racing away this rise is not to boost of any significant changes to be made for the armed forces.  The budget allocation by Chinese for the last fiscal year was upwards of $130 billion. 

         With the allotted $40 billion a major part of it around $22 billion is accounted to for the welfare of the heart of armed forces, the soldiers. This includes the salary, the pensions and for various other benefits the government has to account for. This means only a very small account of around $15-$16 billons effectively is left for the modernizing work. With a void in almost all fields catching up with China is a lot demanding. With the IAF losing its “Fighter Squadron” numbers sharply major decisions have to be made immediately, with China fielding several nuclear powered Submarines in the IOR (Indian Ocean Region) even the navy’s calling out for urgent reforms and faced with severe shortage in the artillery wing the Army’s waiting for its cut from the allotted budget. 

        The very first priority would now be given towards signing the very long delayed MMRCA deal which would effectively strength the IAF. With Boeing threatening to increase the agreed amount for the Apache attack helicopters and the Chinook heavy lift helicopters it’s very crucial the government signs a deal this fiscal year. With MMRCA deal demanding a major chunk of this deal it’s pretty demanding presented the scenario for other major deals to happen this year. And not only does the procurement matters setting up the required infrastructure and squadrons for the same requires a cut of the budget. The army needs an urgent fill of Assault Rifles. Elaborate plans for inducing about 0.6 million was laid out by the army, and the urgency of sights BFJ also costs in billions, the recent F INSAS program demands  about $8 billion.  The BMS (Battlefield Management System) alone requires around $8 Billion if implemented. UAV, IFV (Infantry Fighting Vehicles), F INSAS Program costs another $ 20 billion. Light Howitzers for the newly raised Mountain Regiment along with Light utility Helicopters is also an void that has to be addressed.

          The new government has realized the need to project the power of India not only in the mainland but also to spread the power. With the major part of India’s economy standing on Imports/Exports the safeguarding of EEZ in IOR has been a major concern for the government. Realizing this the government has scaled up the modernization of Navy. Several key projects have been signed and several others are in the pipeline to transform Indian Navy into a blue water navy. With the navy left in dark for several decades the Navy’s cry for modernization and strengthening of fleet with urgent needs to be addressed.  Transformation starting from procurement of US 2 amphibious to the Larger INS Vishal carrier (IAC-II) project and the need for nuclear powered attack submarines has to be addressed. With plans to build a nuclear powered Aircraft carrier known as IAC-II the budget allotted looks too demanding for the project. Navy has to address the underwater capabilities of the nation. Indian Navy has a elaborate plan of inducting several Diesel powered Submarines and has called out tenders for the Submarine project. The navy surely demands a very high share from the allotted budget. The budget also has to address the needs of DRDO (Defence Research and Development Organization) which is the key in modernizing our forces. DRDO has several hundred projects under the roof and several other researches’s taking place to better the stand of Indian forces. 

         Every project needs to be addressed from the year a project/induction is signed by the government. A part of the budget is every year allotted to a sanctioned project until its completion or induction. With increased amount being allotted to the Defence ministry, India can boost of a more powerful and most importantly a modernized Force that is capable of withstanding an attack and if needed bouncing back attack on the enemy territory.

Editor Karthik Kakoor