Modi sarkar's $51-bn defence budget is not good enough for India's security

Defence gets $51-billion for 2016-17 (US$1=INR66), 2.25 per cent of GDP as against $36-billion and 1.75 per cent of GDP the previous year. Capital expenditure has risen to 48 per cent of the budget, a percentage that would leave World War I nations green with envy. However, there is not just one fly in the new budget ointment, there's a whole mess of cockroaches busy eating the ointment. The 2015-16 budget and previous ones left the military crippled; now the military has been given a half-metre tall crutch.

Ministry of finance types reading this will be livid and become even more convinced that the military cannot ever be satisfied. They will be entirely wrong. This analyst estimates that the military has a $400-billion equipment deficit. If we are to raise the military to necessary force levels and to modern standards, even $400-billion is pathetically inadequate. There is no way in which a serious defence can be mounted on less than four per cent of GDP (about what the US spends); for a first-class military (though not a super-class military like the US) we need 6 per cent of GDP.

Now, of course, $51-billion is not the actual budget, it is higher because pensions, border forces, and nuclear warhead/missile development have been left out. But this not something unique to India: the US' real defence budget is probably closer to $1-trillion as opposed to the official $525-billion or so. Pakistan's is $10-billion, double the official $5-billion. All these figures are approximations.

This analyst is happy to note that a $100-billion government investment in gas-powered power stations would provide 400-gigawatts more power than we have now. ($100-billion matched by Indian/international equity investors; multiplied by 3-times loans; assumed $2-billion/gigawatt.) That more-than-doubling of power availability could - probably - just by itself bring our GDP growth to 9.5 per cent. So there is a massive opportunity cost in increasing defence spending.

The problem is this opportunity cost is theoretical because the government is so efficient in spending its money. Moreover, bureaucratic obstacles, which are still very heavy, waste money. If finance ministry wants to say "we're poor, we cannot afford more on defence", this is acceptable to this analyst. But then we should eliminate the threats to our national security: give Kashmir to Pakistan; Ladakh to China; and assure China it is free to expand as it wants. This could bring our defence spending down to one percent of the GDP for a reasonably equipped 3,00,000-person military.

We cannot have it all ways: refuse to let the economy grow freely, which we did for 45 years to 1990, and still hinder; refuse to cut back our need for a very strong defence by adjusting our foreign policy; and refuse to spend government revenues efficiently. And please recall that in 1962 we were spending two per cent of GDP on defence, about $600-million in then-year dollars. The results are well known.

One reason we have to spend so much more money is the astronomical increase in weapon costs. In the late 1960s we could buy MiG-21s for $1-million each (again, all these figures are approximations). Now you cannot buy a heavy fighter for less than $100-million. Yes, the capability jump is also astronomical. Back in the day, $1-billion would have bought 1,000 fighters. We can hardly replace that with 10 fighters, no matter how capable! Another example: the Vijayanta tank cost about $250,000 and it was reasonably matched against the US M-60, then top-of-line.

The Russian Armata, their top-of-the line tank today will not be less than $8-million, whatever the Russians may say to get a sale. But we cannot replace 32 Vijayantas with one Armata. The entire Indian armoured corps would consist of two regiments!