Budget 2019: Despite the big talk, it's clear the Modi government doesn't really care much about defence
The Interim Budget 2019 has set defence allocation at just over rupees 3.05 lakh crores. Basic accounting shows that this is a 3.38 per cent increase on last year's allocation of rupees 2.95 lakh crores.
However, in real terms, the defence budget has shrunk.
Here's why.
Inflation:
Given that inflation has averaged the 4.74 per cent mark last year, one sees even this marginal increase wiped out on rupee inflation alone.
Depreciating rupee:
Rupee inflation is compounded by the double whammy of a depreciating rupee. Since most of our equipment is imported (upto 70 per cent, depending on year), the exchange rate of the rupee to the dollar is critical — this is because while we may account in rupees, international purchases are done in dollars.
Last year, in January 2018, the dollar stood at almost 64 rupees — this year, it stands at 71.25. That's an 11 per cent depreciation in the value of the rupee, meaning that we will have 11 per cent less money than last year to spend on imports, not accounting for the fluctuation in capital allocation.
Capital allocation:
The increase to rupees 1.03 lakh crores this year over last year's 99.5 marks a miniscule one per cent increase. However, given the fact that this year things are more expensive (4.74 per cent inflation plus 11 per cent rupee depreciation), depending on the mix we actually choose to buy, we will end up with a significantly reduced allocation for capital purchases this year.
Overall reduction:
Fiscal year 2018-19 saw defence expenditure stand at 12.10 per cent of the overall budget. This year, despite being the single biggest line item in the Budget, defence accounts for 10.96 per cent of the total government expenditure.
The question really is, what exactly is the government up to?
Defence has never really been a priority — and the BJP, like any right-wing government, gets significant leeway due to a "tough on security" tag that goes with right-wing territory.
As a supporter of lean defence budgets, the consistent plateauing or indeed, contraction of the Indian defence budget over the last five years is to be commended. However, that is only if it is part of a deliberate plan to force the three services to face budgetary realities and streamline their frequently unsustainable and unrealistic wish lists. The problem is, we are not seeing any signs of fiscal discipline and belt-tightening by any of the three services.
As such, the conclusion one has to logically arrive at is not one of administering financial "tough love" on the military, but rather of a government not really caring too much about security and allowing the "tough on security" stereotype to induce strategic myopia.