Source:-Defence Budget: Nothing to hasten modernisation of armed forces
The proposed defence outlay for the next fiscal, excluding defence pensions, constitutes a growth of 7.81% over the budget estimates (BE) for the current year. This is far less than the growth of close to 11% envisaged in the mid-term fiscal expenditure statement submitted to Parliament in August last year.
The proposed defence outlay amounts to 1.58% of the gross domestic product (GDP) and 12.10% of the central government expenditure (CGE). But the position changes dramatically if one also factors in the defence pensions which have seen a sharp increase of 27%, pushing up the overall outlay to 2.16% of the GDP and 16.56% of the CGE.
These statistics becloud the fact that the outlay exclusively for the three services, which is subsumed in these figures, will increase by just about 7.16%, comprising a 7.39% increase in the revenue expenditure and a much lower 6.68% increase in the capital segment.
Much of the increase in the revenue budget will go into paying the salaries and meeting other obligatory expenses on ration, clothing and fuel. As in the past, this is unlikely to leave adequate sums of money for ensuring operational readiness of the equipment in use, buying ammunition and maintaining the existing infrastructure. An increase of approximately Rs 850 crore under the ‘stores’ budget head and a decrease of Rs 2 crore in the ‘works’ budget head of the Indian Army, which cater for these expenses, is a grim reminder of this reality. For the time being, this also puts paid to any plans that might have been in the pipeline for creating cyber, aerospace and special forces commands or accretion in manpower.
The capital budget for the three services does not seem to have done any better. Back-of-the-envelope calculations show that while there will be an overall increase of approximately Rs 5,300 crore, the allocation for the capital acquisition sub-segment will go up by just about Rs 4,500 crore to approximately Rs 73,500 crore, bulk of which will go into meeting the committed liabilities on account of the ongoing contracts.
It is difficult to say how much will be left for the new schemes but it cannot be anything substantial. It does not mean the end of the road for the new schemes, though. In the last four years new contracts worth Rs 2,40,000 crore have been signed by the ministry at an average of Rs 60,000 crore every year. Considering that normally only an advance payment of 15% is made on signing of the contracts, a sum of Rs 9,000 per annum is all that was required to sign these contracts.
It is possible that the capital acquisition budget for the coming fiscal will have at least this much cushion for signing new contracts.
But things could become difficult if the pace of signing the new contracts picks up miraculously and the ministry finds itself poised to sign contracts for a larger amount than the average of the past four years. In any case, it will not be unreasonable to say that there is nothing in the budget figures that indicates that the ministry would be in a position to hasten the pace of modernisation of the armed forces.
Against this dreary backdrop the announcement of setting up two defence industrial production corridors and bringing out an industry friendly defence production policy in 2018 to promote domestic production by the public and private sectors, as well as the MSMEs, rings a bit hollow.
Source:- ET
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