defense sector :While presenting the regular budget for the current financial year, the government did not make any mention of defense sector, nor did it propose to allocate any additional funds for it. Thus the total outlay for the defense sector remained at Rs 4.31 lakh crore, which was proposed in the Interim Budget presented in Parliament. Defense outlay is 2.04 percent of gross domestic product (GDP) and 15.47 percent of the total expenditure of the central government envisaged in the budget. In terms of percentage of these two, the allocation for defense sector shows a declining trend as compared to the outlay of the previous year. Since the interim budget had laid down a roadmap for allocation and funds had been allocated to various ministries and departments. After drafting the new government, no significant changes could be expected in the preparation of the regular budget in a period of only five weeks. This is confirmed by the fact that the total projected receipt of the government in the presented regular budget increased only marginally by Rs 2,149 crore compared to the interim budget.
Status of resources in defense sector
In the last financial year (2018-19), about Rs 1.12 lakh crore was allocated for the armed forces, which was less than their demand. The government’s additional receipt of Rs 2,149 crore would have been diverted to the defense sector even if it had been a very modest fulfillment. A major part of this could have been handed over to the defense sector by creating income and savings along with higher taxation, disinvestment and reduction in allocation of borrowings or other schemes. But the use of these options to transfer additional funds to the defense sector cannot be considered practical. There was also no announcement of the establishment of that long-considered non-lapsable fund for modernization of the armed forces. While the practicality and utility of setting up such a fund is questionable, the Standing Committee on Defense- SCoD has also supported this idea. That is, the government will have to raise funds for the armed forces, whether they are raised through the Non-lapsable Modernization Fund or outside the budget outlay. Expressing concern over the inadequacy of budget outlay for the defense sector will not do. Serious efforts will have to be made to look for ways to raise the level of financing for defense in an affordable way without adversely affecting the financing of health, education, agriculture, infrastructural development and other social sector schemes. Everyone talks about the need to increase the defense budget, but everyone is confused about its measures.
Measures to raise resources in defense sector
The defense sector in India has often faced resource scarcity. The subcontinental size of India and the challenges arising from neighboring countries make the needs of the defense sector necessary. The size of India’s economy is relatively limited and the country’s requirements are high. These needs are spread not only in the defense sector but also in education, health, infrastructure etc. In view of this fact, India is able to provide only a fixed portion of its resources to the defense sector. In such a situation, the needs of this area cannot be met only by increasing the budget allocation, for this a comprehensive policy will be required. Nevertheless, some measures can be taken to meet the needs of the defense sector.
- India spends 2.04 percent of GDP on defense sector. China also spends almost 2 percent of its GDP, but China’s spending is much higher than India, due to the size of China’s GDP being more than four times the proportion of India. Often the allocation allocation in the budget is considered as the only means of financing, if the emphasis is on increasing the GDP growth rate then the budget allocation of the defense sector itself will increase. The government is also emphasizing this idea because the government has an understanding of its financial capability. The government is also pushing for increasing the GDP size to 5 trillion by the year 2024-25.
- To overcome the shortage of resources in the defense sector, some time ago the Ministry of Defense had talked about setting up of Non-lapsable Fund for that part of the annual financial budget of the defense sector which has not been utilized. . It is often seen that defense procurement and other projects are completed in many years and the funds given to them lapse at the end of the year. If a non-funded fund is created, then the problem of budget coming in the defense project can be dealt with.
- India currently has the largest military force after China. The nature of war has changed in the modern era. In such a situation, such a large number of the army hinders the increase in capital expenditure in India’s defense budget. It is worth noting that last year the budget for salary and pension was increased by 27 percent, while for capital expenditure only 9 percent was increased. If there is some reduction in the number of soldiers, then the savings from this can be used for capital expenditure such as purchase of equipment and modernization of the army.
- In India, the army has a large amount of unusable land lying in the country, its market value is high. If the government makes this land available to the market for economic use, then it can have economic benefits. But there are some security challenges related to it which will also need to be taken care of.
- Various devices can be made in the country itself by promoting innovation and research in defense sector. At present, India has to depend on foreign countries for these equipment, such as state-of-the-art aircraft, helicopters, ships, radars etc.
- India had made an agreement to buy Rafale aircraft from France some time ago. This agreement was very expensive. If such equipment is manufactured in India, it will be beneficial for the Defense Department as well as for the economy of India.
- The Standing Committee has repeatedly recommended that the defense budget be raised to three percent of GDP. If the defense budget can be increased without cutting other essential items, the government must make efforts for this.
Governments in India did not put much emphasis on making the defense sector efficient, nor suggested alternative avenues to overcome the scarcity of resources in the region. Since the budget discourse was mainly focused on the government’s outlook towards the future, it would have been appropriate that the government announce the formation of a workforce of defense economists to advise on measures to increase defense outlays to meet the expectations of the defense establishment.
It would also have been appropriate that the budget would have given details of the result of the defense sector announcements made in the last five years. In the past years, the following projects have been talked about:
- Constitution of Defense Planning Committee.
- Start of Industrial Corridor Project.
- Constitution of Defense Technology Fund.
- Establishment of an investor cell.
- Enforcement of strategic partnership plan.
- Various projects related to ‘Make in India’.
These projects have not been discussed in the budget by the government. One reason for this is that the government lacks budget for them and there is also lack of necessary action plan. India has already made a provision for allowing foreign investment in the defense sector, India can strengthen the Make in India by providing the necessary environment to attract private sector in defense sector. Apart from this, the government will also have to make other efforts for the above mentioned projects so that the lack of resources in the defense sector can be overcome.
The most practical step in this scenario would be to quickly revise the modernization action plan for the next five years and ensure that it is in line with the availability of funds. This has happened a few times in the past. Last time in July 2017, the Armed Forces demanded funding of 27 lakh crore rupees in the next five years. There was a need to double the allocation of the current budget to meet this demand. There was no serious discussion on how to finance the demand and if this is not possible then what is the best option. It would be appropriate to understand the real situation and move forward according to the economically viable plan where it is accepted that the availability of funds will remain the biggest challenge until the experts find a solution or the Indian economy is worth $ 5 trillion. Do not ensure high attainment for the government by reaching the level.
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