Balance is the best defence

On the other hand, credible military power is a necessity to meet future challenges and current threats. For us the stakes obviously are high on both counts; and the answer lies in establishing an affordable credible balance between defence and development and not get into an either/or choice syndrome. We have been spending an average of 2.32 per cent of the GDP annually on defence for the past 14 years compared to 2.87 per cent for the decade before that. This has been coming down and with a budget of Rs 66,000 crores this year amount to around 2.13 per cent of GDP8212;the lowest figure since 1962. This obviously has released more resources for development. But the crucial question is: Can this level of spending give us a credible defence capability for the future? We know that superior technology has historically provided the competitive edge in wars since ancient days down to the Iraq War.

With manpower costs rising at nearly 10-11 per cent per year, lower investment in defence can only be at the cost of modernisation and acquisition of high-technology systems. Given the imperative of building a high-technology military and the cost of such weapons and equipment, the answer to the question is an unambiguous No!

The issue then is what should be done about it? Here we come up against another dilemma: that of choice between a high-technology firepower-based military versus a large manpower-based force. It was easier to manage this earlier because costs of both were manageable and frequent wars allowed public support for defence spending. The issue now gets extremely complex and turf battles for a share of the small cake tend to become the dominant phenomenon in defence planning and inter-service relations. But what is very clear is that we need a high-technology modern military if it has to fulfil the tasks of external defence, especially in the context of nuclear weapons environment. By definition a high-technology force would cost much more.

During the five years immediately after the economic crisis of 1990-91, defence spending had grown at an average annual rate of 11.9 per cent. This tried to cater for the devaluation of the rupee against western currencies and pay off outstanding defence debts while blocking modernisation. Fortunately the currency exchange ratio has stabilised after the downward slide to one-third of earlier value in the early 1990s.

But we need to remind ourselves that the days of low-cost fairly high-technology weapons and equipment mostly on Rupee payment on long-term credit at low interest rates from the Soviet Union are long gone. Russian weapon systems still cost less, and we may be able to afford to pay in hard currency because of our substantive foreign exchange reserves. But weapon costs have been rising dramatically; and our manpower and related costs continue to grow.

Our defence spending grew at an average rate of 7.2 per cent compared to 11.9 per cent in early 1990s per annum during the past five years. Can we stabilise our defence spending in a longer-term context so that defence modernisation does not suffer in budgetary fits and starts? Two issues deserve the attention of our policy makers. The Finance Ministry would need to recognise that the level of sustained funding that defence has received during the past five years would be grossly inadequate for credible defence. And the Defence Ministry along with Defence Services would need to plan on the basis that it would be impossible to get funding for the foreseeable future at the level of 3 per cent of the GDP that the 11th Finance Commission had stipulated.

Sound economic policies require that we control our government expenditure for better fiscal management. And sound security policies require that we maintain a modern high-tech military power. Burden-sharing by defence and other segments of government expenditure is the obvious answer to meet the two objectives.

Defence spending in relation to GDP is invaluable for comparative assessment of national resource investment. But planning defence spending as a proportion of the government expenditure would give us a practical approach to optimising defence and other government expenditure.

The states don8217;t spend on defence, but obviously derive the public good from it. What is required is to benchmark a proportion of the Total Central and State Government Expenditure TGE that should be devoted to defence during the next 5-15 years. This in fact, should guide our national plan as well as the 5-year Defence Plan. Since revenue expenditure of defence forces is pre-committed in pay and allowances, the resource crunch axe inevitably falls on capital expenditure and modernisation, and hence on future capabilities. Defence used to receive more than 10 per cent of the total government expenditure during the 1980s and came down to around 8 per cent during the 1990s. It has now crashed to below 6.5 per cent and reducing!

Such levels, in reality, would increase reliance on the early use of nuclear weapons. The answer lies in progressively increasing the share of defence in TGE to an agreed level which should be sustained over the coming years. It would be difficult to maintain a modern high-technology military force even at 9 per cent of the TGE. The defence establishment would need to seriously get down to reducing revenue expenditure of the defence forces without cutting military effectiveness.

This would require review and reforms in our defence policy and its management. If we wish to see a modern credible defence capability by the end of this decade that is also affordable, then we need to institute policy changes that should have been the priority after Kargil, but somehow lost out to nuts and bolts issues rather than any strategic re-look on how we should manage our future defence.

PART II

PART III

PART IV

PART V