31 May 2004 23:49
Balance is the best defence
As the new Finance Minister starts to craft the national budget, he would naturally come up against the problem of
revenue and fiscal deficits and the need to control them by tightening government expenditure. He also must increase the
investments in agriculture and other development areas. But the new Defence Minister is bound to seek funds for long
overdue modernisation that the Finance Minister would not find easy to concede to because of the fiscal management
challenges and other priorities. There is also no emergency like the 1962 war which made the then Finance Minister
double. within hours, the budgetary allocations that he had vigorously opposed for more than a year! The problem is that
the government faces the typical contradictory pulls of defence capability and modernisation for a future war on one
side, and the needs of development and sound fiscal management on the other. The elections have demonstrated that the
people want faster development than we have witnessed; and for this development to filter down to the lower layers of
society, especially in rural India. 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 GDP-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 don’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.
[Indian Express] |
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