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Shrinking Horizon of an Expanding Economy

India's defence spending keeps rising - for internal and external operations, on manpower and armaments - and yet little of this is subject to much interrogation.

Shrinking Horizon of anExpanding Economy

India’s Military Spending

India’s defence spending keeps rising – for internal and external operations, on manpower and armaments – and yet little of this is subject to much interrogation.


he absence of a robust debate on military and security matters has been hampered by a paucity of information. That military matters are governed by a “need to know” basis is known. But even information that is available in the public domain, but is scattered, is not collected and collated. Furthermore, even when a debate takes place and information, hitherto governed by secrecy, enters the public domain, policy itself is never put under scrutiny. In this context, if even a tenth of the heat generated over the July 18, 2005 Indo-US nuclear understanding had been devoted to discussing the rights and wrongs of India’s nuclear weapons programme, the debate would have been well rounded. Instead, an indulgence is shown towards wrong policies because having created new facts on the ground, the best is sought to be retrieved from the worst. Needless to add, there is a direct link between accretion in military prowess to become a big power and the scarcity of resources to provide for social investments. This is just as there is a link between budget allocations which augment the manpower strength of the military and the deployment of these forces for a sustained period at home against our own people.

There is, however, a positive fallout of the debate over the Indo-US accord. From now on, it would be erroneous to discuss the financial outgo on the military without including a part of the allocation currently subsumed under the department of atomic energy or under the department of space. Similarly, in view of the overlap between external and internal security as well as the overt role of the army in internal security operations, it is wrong to treat the allocations for defence and central paramilitary forces (CPMF) as separate issues. Additionally, the current outlay and the burden of pension for personnel who have retired must also be treated as being part of the overall military outgo. There is of course, a possibility of overestimation. But as an approximation this is a realistic procedure. Furthermore, it offers a glimpse of the direction of military expenditure, highlighting constraints imposed on the future budgetary exercise of the government.

Seen in the context of total world military expenditure of $ 1035 billion in 2004, according to the SIPRI Yearbook 2005, India’s military expenditure of $ 23 billion in 2004 appears minuscule. In fact, the expenditure of $ 23 billion by India in 2004-05 appears to be insignificant compared to the US, which accounts for 47 per cent of the world total. This is more than the combined military spending of Africa, Latin America and Asia (including China but excluding Japan)! However, the direction of India’s military spending is a cause of concern. But let us begin by finding out how much has been allocated for the country’s military preparedness and under which head of expenditure.

The accompanying table helps explain that the total defence spending in 2006-07 would be Rs 1,25,438 crore. This represents approximately 23 per cent of the total expenditure of the government of India for 2006-07 and about 3.1 per cent of the expected GDP. The table also provides an idea of the allocations using the same principles for budgetary outgo on the military between 2001 and 2006. The debate between an equipment-based versus manpower-rich force has been settled. The emphasis will be on both and therefore India’s military will procure lethal weapons and carry on recruiting personnel in various branches of the military. Thus, the capital outlay for the armed services has nearly doubled between 2001-02 and 2006-07. This is in line with what is called “big ticket” purchases. Although the army’s request for artillery guns and tanks is pending, Rs 10,230 crore earmarked for the army under the capital outlay will pay for procurement of missiles, rocket artilleries and infantry modernisation. The Rs 9,072 crore for the navy is meant to pay for naval ships, including under the recently signed deal with France for Scorpenes submarines. Significantly, a delay in decision-making in the 1990s had caused much hardship to Mazagon Docks (MDL). Its skilled workforce, which numbered 16,000 in the 1980s, got halved and there were times when more than 4,000 workers remained idle. Since 2001 when the last of the submarines rolled out, its submarine assembly line has been lying vacant. Now that the navy is becoming a blue water force its requirement for warships will keep the MDL busy. Finally, Rs 14,903 crore earmarked for the air force will go towards payment of instalments for the Hawk trainers from Britain and Israeli Phalcon Airborne Warning and Control System (AWACS). Once a decision is taken on acquisition of a new generation of fighter

Economic and Political Weekly April 8, 2006

aircraft, the allocations will climb. It is interesting to note that utilisation of capital funds slipped in 2005-06 with the MoD returning Rs 1,300 crore in the revised estimate. In 2004-05, the MoD had achieved 100 per cent utilisation. Of course, the slippage is nowhere near that in earlier years. In 200001 the unutilised funds stood at Rs 3,148 crore; in 2001-02 it was Rs 3,002 crore; in 2002-03 it reached Rs 6,499 crore, whereas it was Rs 4,046 crore in 2003-04. Timely utilisation means that procurement decisions are taken speedily to protect against price hikes as well as the vagaries of the international arms trade.

However, such outlays, notwithstanding slippage in utilisation, also mean that India continues to be dependent on arms imports. This is a matter of concern. While it is good that the country is not dependent on any single source for its military requirements, Israel and Britain are particularly vulnerable to US arm twisting. Not too long ago Britain did not furnish components or return the Sea King and Sea Hawk sent there for repairs precisely because the US placed an embargo. Above all, arms imports impose a budgetary burden in terms of servicing, maintenance and inventories of spares and components. In 2006-07 under the head of Stores, the three services have been allocated Rs 18,756 crore. This was Rs 18,183 crore in 2001-02; Rs 18,084 crore (2002-03); Rs 18,184 crore (2003-04); Rs 15,649 crore (2004-05) and Rs 18,329 crore (2005-06). This represents more than 10 per cent of military outlay annually!

Rising Manpower Costs

the coast guard used to find mention under the ministry of finance’s demand for grants under “Indirect Taxes”. Since then it has been shifted to the ministry of defence. Again, until 1997, Rashtriya Rifles used to figure under the ministry of home affairs. In fact, the Rashtriya Rifles was carved from existing army regiments. From 1990 onwards, the ministry of home affairs owed Rs 950 crore to the army for raising and equipping the Rashtriya Rifles. From 1998-99, separate allocations were earmarked for this unit under the army’s demand for grants. By the end of 2005 it was to be 66 battalion strong with each battalion having 1,150 personnel for counter-insurgency. From a budgetary outlay of Rs 263 crore in 1998-99 it has grown in 2006-07 to Rs 1,414 crore! JAKLI with its 15 battalions was known as Jammu and Kashmir Militia until 1977 and allocated funds under the euphemism “Special Police” falling under the ministry of home affairs until 2004-05. Since 2005-06 it figures in the ministry of defence budget.

There is something interesting to note about the head of expenditure “Special Police” in the ministry of home affairs’demand of grants for CPMF. Until 2003-04 this head represented an outlay of Rs 222 crore meant for JAKLI. In 2004-05 the Rs 280 crore was allocated under this head to JAKLI as well as for “reimbursement to state governments for maintenance for border check posts” and also for the National Technology Facility Organistaion (NTFO). In 2005-06, JAKLI was separated and shifted to the ministry of defence with an outlay of Rs 255 crore, yet allocation under the head “Special Police” in the ministry for home affairs’ demand for grants was mentioned as Rs 694 crore as reimbursement to state governments for border checkposts and NTFO! In 2006-07, the allocation under this head has risen to Rs 951 crore but, the NTFO has been removed. Since both figured under the category “Special Police”, one presumes that this represents a new border police formation being maintained by some state governments. These appear to be over and above the outlay for BSF which is supposed to look after border security all along India’s international borders. So why is another force being set up which requires ever increasing allocation? What is this force which required some tens of crores in 2004-05 to Rs 694 crore in 2005-06 and has been allocated Rs 951 crore in 2006-07? And what is the NTFO, which made its appearance in 2004-05, and disappears from the 2006-07 budget estimates?

Nuclear Weapons Programme

Finally, India spent Rs 9,969 crore between 2001-02 and 2005-06 on the nuclear weapons programme. Now that the separation plan has been announced, the weapons programme will carry on. The agreement on civilian nuclear reactors, however, will not bring down the allocation for the nuclear weapons programme and may, in fact, have a bearing on India’s relations with its neighbours. True, the separation plan does not benefit the US directly. Its civilian nuclear industry is not

Table: Military Expenditure

(In Rs crore)

The other aspect to note is that manpower costs of the military continue to rise. They will further expand with new formations being raised both by the central government as well as by the state governments which is paid for by the ministry of home affairs. Thus, the Girijan battalions being raised by Andhra Pradesh or the new anti-Naxal battalions being raised by Orissa, Jharkhand, Chhattisgarh, etc, will push up aggregate manpower costs. Pay and allowances for the army, navy, air force, coast guard and Jammu and Kashmir Light Infantry (JAKLI) is Rs 20,817 crore. Add to this Rs 6,000 crore for the CPMF as well as pensions (Rs 13,224 crore for services and about Rs 2,274 crore for the CPMF) and manpower costs are in excess of Rs 42,215 crore.

Over the years, the budget papers have become more transparent.Until 2001-02,

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
MoD 375 911 632 886 1500 1890
Pensions 10790 10700 11000 11250 12452 13224
Army 31103 30691 28921 27829 31243 32299
Navy Air Force 4258 7714 4554 8187 4951 8324 5294 8468 6027 9005 6713 9858
R&D(1) 2734 2343 2814 3008
Cap Outlay DAE(2) 19959 1250 21411 1934 20953 1900 33483 2235 34375 2650 37458 2665
Space(3) 1015 1132 1184 1366 1574 1805
CPMF(4) Pension(5) 8951 1440 9995 1456 9529 1500 11288 1570 13429 1975 14580 2274
Ordinance -1033 158 –583 -417 -464 -336
Total Mil 85802 91129 90845 105595 115467 125438
Total Exp 375223 410309 438795 477829 514344 563991

Notes: 1 Until 2002-03 R & D was a part of capital outlay. 2 50 per cent of total DAE outlay is considered part of the military budget. 3 50 per cent of the outlay for space is also considered part of the military budget. 4 Excludes the outlay for the Delhi police. 5 Only one-third of the outlay for pensions under the allocation for the ministry of finance for government employees is taken as meant for central para military force personnel. This errs on the side of caution since there is a difference in pension for officers and others. Note that employees of the railways and communications are not covered by the allocations since those come under own departmental budgets.

Source: Expenditure Budget, Volume 2 (Union Government, Budget Documents).

Economic and Political Weekly April 8, 2006 competitive. But by working to revoke the restrictive technology regime the US had once created, the US expects to gain in terms of defence deals, and market access, but above all bringing India under its imperial domain. In November last year, India’s foreign secretary claimed that India-US relations could “contribute to creating a greater balance in Asia”. He added that “In the context of Asia, there is no doubt that a major realignment of forces is taking place” (Times of India, November 29, 2005). The quadrennial defence review by the US says that China’s “growing potential” to compete militarily with the US is putting “regional military balances at risk”. It spoke of India as “a key strategic partner” in this context. Perhaps reflective of this is the Logistics Support Agreement, which proposes to provide the militaries of the two countries authority to request and use each other’s facilities for maintenance, servicing, communication, medical care and refuelling. This is just short of base rights but would enable the US, the stronger party, to access physical military resources offered by India. In a decade and half of burgeoning military relations between the two, the US has been holding regular exercises that have reached new heights. Reflective of this, recently after just three days of planning, the two navies began communication drills off the coast of Sri Lanka, which escalated to air combat manoeuvres. This so-called “growing inter-operability” of the two navies is important to note because to organise such an exercise usually takes months of planning (Indian Express, February 22, 2006). Moreover, the Indian navy has been showing great interest in the Malacca Straits and on several occasions it has escorted US “high value” ships through these pirateinfested straits. This is indicative of how the US may be keen to subcontract the lower end of security to its new-found ally to preserve its own military assets for higher end operations. The Indo-US ‘New Framework for the US-India Defence Relationship’ unveiled on June 28, 2005 shows that India has agreed to deployment of troops in “multinational operations”, i e, when “it is in their common interest”. It says that the two sides “will work to conclude defence transactions, not solely as ends in and of themselves, but as means to…reinforce our strategic partnership” (The Hindu, June 29, 2005).

Arguably, all this does not mean that India will or has become a vasaal state of US. Our political class is adept in mediating conflicting pulls and pressures. And, as was demonstrated recently, it is not immune to public influence. However, given the innate desire of the Indian elite for India to become a big power, any which way, and its propensity to equate self-interest with national interest, compromises with imperialism cannot be ruled out. The other danger is the poor track record of the US of abiding by international norms, law and obligations. In this sense, unless India becomes a client state it cannot be sure that at a moment of crisis the US will not renege on its contractual obligations. Besides, the national security perspective no longer sees the US as a threat, potential or real, despite US presence in our immediate and extended neighbourhood. In fact, its presence has been understood as being beneficial insofar as it constrains Pakistan’s manoeuvrability even if it aggravates China’s perception of India as being now a party to its encirclement. How this can benefit India one does not know. This allows India to have little more room in the conduct of its policy vis-a-vis China. Given the rivalry between the two, this is not unusual. But there is a world of a difference in being seen as a subordinate player, which is what the US expects of its allies, and acting as an player independent.

Loss of Independence

The government of India has not exactly exhibited independence over Iran. The argument advanced about not wishing to encourage nuclear proliferation in India’s neighbourhood does not exactly wash. After all, it was our decision to go in for nuclear weapons that encouraged Pakistan to do the same, just as it is Israel’s possession of the same and US-led NATO’s hostile presence in Gulf region that motivates Iran’s pursuit. It is true that rather than enhance our independence the pursuit of nuclear weapons actually contributed to its curtailment because we came under a restrictive technological regime. And now, paradoxically, in order to lift this, our government has had to strike a deal with US which has made us beholden to them. This does not mean that Pakistan’s role in proliferation should be ignored, but to single out Iran while the US mollycoddles Pakistan’s military regime makes no sense. Indeed, it is rather tragic that the demand for global nuclear disarmament has been replaced by a global ganging up against a new entrant. Having now become a nuclear power India should push for global nuclear disarmament, if it is actually concerned about nuclear weapons proliferation.

Granted that the world is passing through a period of great flux. The war against terror in Afghanistan and Pakistan by US-led NATO forces threatens to spin out of control. Pakistan is deploying forces to fight two wars simultaneously: 80,000 all along its borders with Afghanistan and 25,000 against Baluch nationalists. Both wars are inherently destabilising. What is missing are parallel or countervailing perspectives. It is the straitjacketing of debate within narrow confines that stymies the search for other policy options. The UPA government, for a variety of reasons, was compelled to share its stance on Iran or the nuclear separation plan. The debates helped the government strike a better deal on civilian nuclear separation than was first envisaged by the prime minister’s office. Even on Iran, the UPA government finds itself in a bind and is looking to Russia to reach a settlement with that country. In this sense, the debate has been useful. A competitive display of patriotism is not necessarily bad because no one can claim a monopoly over patriotism. But it also exhibits limits. The lack of interrogation of the country’s six-decade-old approach of military suppression of popular movements makes one wonder whether security against want and injustice matters at all to the elite and, if so, why it is accorded such low priority. Just consider this. In searching for alternatives, why not factor in how a honourable agreement with the Naga people would not only end an ignoble war foisted on the Nagas but also enhance India’s “Look East” policy, which seeks greater economic cooperation with our south-east Asian neighbours? Or for that matter, a democratic resolution of the Kashmir dispute can help end a six-decade-old problem between India, the Kashmiri people and Pakistan. And, encourage greater economic cooperation in the subcontinent? In fact, why the conspicous absence of a passionate debate over socio-economic inequalities and disempowerment of people in this largest democracy in the world when discussing the problem posed by socalled “Left Wing Extremism”? In short, it is intriguing that concerns of the sovereign people do not matter although issues of national sovereignty are supposedly the main focus of national security and therefore the budgetary exercise. It is this disconnect that needs addressing.



Economic and Political Weekly April 8, 2006

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