On February 1, Union finance minister Nirmala Sitharaman will be presenting the anxiously awaited Union Budget for the fiscal year 2023-24.
That Union Budgets for the past few years have been presented almost two months before the end of the ongoing financial year displays the BJP government’s penchant for doing things differently!
Behind closed doors, the details of the Budget would have been finalised with all financial pundits and industry, in particular, now waiting with bated breath to analyse the Budget in all its nuances. That particularly after the Covid-19 pandemic global economies have been over-stressed would be stating the obvious. Despite the looming threat of a global recession and after initial hiccups in battling the devastating pandemic, severe inflationary trends and growing unemployment, it is also a fact that the Indian economy has performed satisfactorily.
Governments are charged with the responsibility of ensuring adequate health care, education facilities, food for all, progressively infrastructure development, running of myriad institutions of governance, ensuring the maintenance of law and order, facilities for industrial growth and a decent living for all its citizens. They have a more than exacting task cut out for them.
Importantly, the demands for the country’s security preparedness always remains a major financial challenge. Defence budgets have to take into consideration all the changes in geopolitical dynamics, the formidable security threats from potential adversaries and national strategic goals, and thus plan for equipping and sustaining its armed forces. The imperatives of building all constituents of Comprehensive National Power to ensure the nation’s security and consequently its defence preparedness is indeed a mind-boggling exercise, with finances always being a constraint. In addition, sluggish bureaucratic procedures in defence procurement, changing governmental policies and the services themselves altering their acquisition priorities and requirements, apart from increasing fiscal deficits, is a dampener.
India, located in one of the most geopolitically stressed and volatile regions of the world, faces myriad formidable strategic challenges to its security, economic well-being and growth. India has to keep at bay the growing Chinese assertiveness against it by the latter endeavouring to nibble away Indian territory in the Ladakh and Arunachal regions, and planning collusive machinations against India with its client state Pakistan.
Infrastructure development along the India-China borders will have to be
continued with added fervour.
China's expanding naval activities in the Indian Ocean needs constant monitoring by the Indian Navy. The Navy’s urgent requirements for additional submarines and a third aircraft-carrier, apart from the latest naval aircraft for the already deployed two aircraft-carriers, will require massive financial outlays.
Importantly, the Indian Air Force’s depleting fighter aircraft fleet, now down, reportedly, to 32 squadrons, has to be restored to 45 squadrons. The Indian armed forces’ forays into emerging niche and disruptive technologies to thwart future asymmetric and advanced technological threats and in R&D will also require substantial budgetary allocations. India’s defence budget for the year 2022 was Rs 5,25,166 lakh crores (around $70.6 billion). Salaries consumed 31 per cent and pensions a hefty 21 per cent, leaving only 24 per cent for modernisation. Most analysts surmise that, notwithstanding the overall financial health of the nation, the defence budget owing to diverse forthcoming challenges may witness a hike of 10-15 per cent in allocations and thus be in the region of Rs 6.6 lakh crores or so. It goes without saying that the IAF will need the highest allocation for capital equipment, followed by the Navy and then the Army. Owing to its size, the Indian Army traditionally consumes nearly 50 per cent of the defence budget.
Historically, since 1950 onwards, India’s defence budgets have been allocated from 1.6 per cent to 3.5 per cent of the GDP — the highest allocations being after the 1962 India-China war. For many decades, the GDP share for defence has remained at 2-2.5 per cent, while in the past decade or so it plummeted to even less than two per cent.
Parliamentary sub-committees on defence have unanimously recommended a three per cent share for defence. Keeping in mind the tight financial situation and other demands, it is felt that at least 2.25-2.5 per cent of GDP must be allocated for defence owing to the diverse security challenges confronting the nation.
A critical ingredient in defence budgeting and overall savings for the national exchequer is the thrust which the indigenisation programmes in manufacture of defence equipment and platforms would get. Thus, the government’s thrust towards the “Atma Nirbhar Bharat” programme must be given the necessary fillip. Public sector ordnance factories and our private sector giants must join hands and, if necessary even with the help of foreign collaborators, set up state-of-the art production facilities for the manufacture of defence equipment for the Indian armed forces and also for export. The era of operating in silos must be truly discarded. However, a level playing field for private sector defence equipment manufacturers must be ensured.
The sound recommendations of the 15th Finance Commission need to be
implemented with alacrity. Its recommendation of the creation of a non- lapsable defence fund (suggested by the armed forces for years) needs to be adopted as each year a large amount of money allotted for defence procurement lapses into the Consolidated Fund of India for not very convincing reasons!
A clear-cut vision, a sound threat perception analysis, a pragmatic pursuit of the nation’s strategic goals, embellished with financial prudence and synergy among the services and other security forces, various ministries and institutions of governance will enable the nation to get more “bangs for the buck” in these times of financial stress and competing criticalities.