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Priorities and Challenges: Pre-Defense Budget 2024-25 Insights

What are the pre-budget expectations for the defense sector? Why is increased funding critical to enhancing military capabilities? What urgency exists for defense modernization? What challenges are anticipated? Read on to explore all the details

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The prime measure of a successful defence budget is whether it makes significant contribution towards capability development of the military, including modernisation of the force. The litmus test for India’s capability development is whether its military capacity is capable of winning wars against its potential adversaries, thus deterring them from creating mischief across our disputed borders. 

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In terms of context, the nature and character of wars being fought currently tell us four things: one, wars are still possible in the 21st century, and these may happen without warning, hence the need to maintain strong capability and operational preparedness at all times;  two, wars  may not necessarily be short and swift, they may tend to drag on, hence the need for assured sustenance, adequacy of reserves for long drawn wars, and self-reliance to the extent possible; three, the defender, if well motivated and suitably equipped, is better placed to give a bloody nose to the attacker, hence need to ensure high levels of equipping, training and motivation; and four, technology, especially precision guided missiles, drones and anti-drone systems, hold the key to achieving success in tactical battles, hence these must be acquired up to desired levels.

The strategic threat perspective in our context is related to the economic rise of China over the last three decades and its consequent military modernisation, which  has resulted not only in aggressive actions against its maritime neighbours towards its East but also in military assertiveness, coercion and subterfuge along its disputed borders towards its West.

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Relatedly, the Chinese Army intrusions across the LAC in Eastern Ladakh in May 2020 has resulted in both armies continuing in eyeball-to-eyeball deployment in the area since then - and the problem has yet not been resolved despite multiple rounds of talks and negotiations. Concurrently, China’s increased spending on defence over the past two decades, as it tries to catch up with the United States militarily, has resulted in the capability gap between India and China increasing steadily in China’s favour, both in overall quantity and quality.

On the other hand, to the West, the Pakistan Army continues its efforts to keep the J&K issue alive by meddling across the LoC in J&K, for which it has been employing its irregular proxies to launch terror attacks across, even south of the Pir-Panjal range, in the Poonch-Rajouri area. In the North East, while a civil war rages in Myanmar towards its East, our Manipur state continues on the boil after ethnic clashes erupted between the majority Meitei community and the Kuki tribals in May 2023. All this does not augur well for security along India’s borders, both in the short and long term, for which, the military needs to be prepared.

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Capability building of the three wings of the military - the Army, the Navy and the Airforce - is essential to meet the country’s current and future warfare needs. Capability building primarily consists of two elements – making up of existing deficiencies in war preparedness, in terms of both arms and munitions, and, modernisation of the force.

Important items on the military modernisation wish list are fifth generation fighter aircraft, S400 and other air defence systems,  precision guided missiles (PGMs), 155 mm towed artillery guns, light tanks, air defence missiles, AK-203 Assault Rifles, wheeled and tracked infantry combat vehicles, utility and combat helicopters,  drones of all types and configurations, anti-drone systems, both kinetic and electronic, AWACs and other Airborne Early Warning aircraft, anti-submarine ships and submarines, including lease of a second SSBN.

The Indian Navy is clearly in the forefront as far as indigenous modernisation efforts are concerned, with 41 ships of various categories, including an aircraft carrier, under varying stages of construction in Indian shipyards. Needless to emphasise, if capability building of the Indian military falters, due to any reason whatsoever, resultant gaps in our military preparedness would immediately be exploited by our adversaries.

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With regard to the structure of the defence budget, it comprises two broad elements – firstly, the revenue budget for sustenance of the force – salaries, rations, clothing, fuel, transportation, health, maintenance, ammunition etc. and secondly, the capital budget, meant for purchases of new equipment and for infrastructure development. 

Due to inflationary trends, the administrative costs of sustaining the military keep increasing continuously. The more the money required for revenue expenditure, the less the money available in the defence budget for capital purchases. And, to compound the problem, a large component of the capital budget comprises of the committed liabilities, i.e. the instalment payments on previous purchases of military equipment.  All this results in a very small portion of defence budget being available for purchases of new equipment, towards military modernisation.

Further, complex procedures for procurement of equipment result in long procurement cycles – and consequent delays in military modernisation result in calls for raising of additional manpower intensive units and formations to deal with possible threats. More manpower implies additional load on the revenue budget. So, it is a vicious cycle for which there appear to be no easy solutions.

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Much as some of us would like to believe that the fault essentially lies with the process, it is the view of many that, more than any other reason, it is a lack of resources, in terms of budget allocations, that presents the maximum challenges to our defence acquisition and modernisation plans. To that extent, the primary question that needs to be answered is, whether the defence budget belongs to the nation or to the military. Is a strong, modern and credible military the need of the nation or that of the military? A prime example is how, despite our identified need for 126 MMRCA aircraft, we ended up buying just 36, citing shortage of budget.

So, what does the Indian military need to do, especially the manpower predominant Army, to achieve our military modernisation goals. In my opinion, there are six things that need to be done, without which, military modernisation will be slow and tardy. In order of importance, these are:

Firstly, we need to increase the defence budget. Over the years, the defence budget has borne the brunt of the ‘guns versus butter’ debate. The defence budget, without pensions, last year, at 1.51% of GDP, was the lowest in our history, even lower than the 1.66% in 1962, the year we suffered a major reverse against the Chinese. After adding pensions, it was 1.97% of the budget. Artificially beefing up the allocation figures, by adding pensions and salaries of defence civilians to the allocation figures, does not help the modernisation cause.

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Non allocation of adequate defence budget has resulted in the modernisation plans lagging and the wish-list getting longer year after year. Consequently, all three wings of the military are burdened with old equipment, which require additional funds annually for maintenance. Ideally, the defence budget, with pensions, should be about 3% of the GDP, to make a significant effect on military modernisation plans.

Secondly, the proportion of capital funds for modernisation need to be increased in the defence budget, in ways that are effective. Increased salaries and maintenance costs eat up a large proportion of the budget in revenue expenditure terms, leaving inadequate capital funds meant for procurement. And considering that committed liabilities eat up a large portion of the capital funds, there is very little left for funding new purchases.

Thirdly, a system of roll-on (non-lapsable) fund for defence modernisation must be implemented at the earliest. There is no doubt that unless capital funds meant for defence procurement are not allowed to lapse annually and there is an effective system of a roll-on, non-lapsable Defence Modernisation Fund, defence modernisation will just not happen. In the recent past, such a measure was announced, which ambitiously has included the sale of excess defence land as a source of funding, but clearly, the implementation of such a plan will be very slow, if at all. 

Fourthly, Inter-Ministerial coordination for Defence Modernisation needs to be improved, drastically. The Defence Ministry’s needs for Defence Modernisation and the Finance Ministry’s needs to provide funds for human development and other purposes should not be seen by the latter to be in cross-purpose with each other. The Finance Ministry must not divert funds meant for defence modernisation for any other purpose. Rather than work at cross purposes, a harmonious system should be put in place to optimise achievement of defence modernisation goals.

Fifthly, Defence Procurement must be transparent and suspicion-free. Any whiff of wrongdoing in defence deals can set back the defence procurement and modernisation process by years, even by decades. The Defence Procurement Procedures must ensure that the possibility of wrongdoing is totally removed. All details of price and price negotiations must be made available for scrutiny. In case of wrongdoing in defence deals, the perpetrators must be identified and stringent action taken against them. Concurrently, it must be ensured that, the fear of suspicion and allegations does not prevent the officials concerned from prevaricating on defence deals.

And sixthly, Indigenise, but not at the cost of weakening our military deterrence capability.   Shortfalls in quality or delivery schedules by the Defence PSUs, which play a critical role in the nation’s self-reliance objectives, are indicators of where we stand and what we need to do.

To summarize, in times of serious tensions on our Northern borders, Budget 2024-25 provides yet another opportunity to provide urgently needed funds for defence modernisation. The question that comes to mind is whether the Govt will ‘bite the bullet’ or will another opportunity to allowed to go by, unaddressed?

Lt Gen Phillip CamposThis Article has been authored by Lt Gen (Retd) Philip Campose. He is the former vice chief of the Army. 

*Disclaimer: The views expressed here is that of the authors and does not represent the views of TICE.

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