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An Evaluation of India's Defence Expenditure

This essay attempts to make a realistic assessment of current levels of defence spending in India by evaluating the effi cacy and intensity of military expenditure. The media is largely ignorant or chooses to ignore the issue of defence spending. The view across the political spectrum and the strategic community is that any exercise to limit this spending amounts to compromising national security and is therefore not a viable consideration. Whilst it is true that development cannot take place in an insecure environment, defence expenditure in a developing country has a direct impact on the outlay on social spending. The "guns versus butter" argument is valid especially when the guns are not buying the security the country needs against asymmetrical threats from within and without.

An Evaluation of India’s Defence Expenditure

Pavan Nair

efence economics has not been a subject for serious study or debate in Indian academic or military circles. Little or no literature is available with the exception of a few books in the area of defence accounts. Economists and activists have long argued that defence-related

This essay attempts to make a realistic assessment of current levels of defence spending in India by evaluating the efficacy and intensity of military expenditure. The media is largely ignorant or chooses to ignore the issue of defence spending. The view across the political spectrum and the strategic community is that any exercise to limit this spending amounts to compromising national security and is therefore not a viable consideration. Whilst it is true that development cannot take place in an insecure environment, defence expenditure in a developing country has a direct impact on the outlay on social spending. The “guns versus butter” argument is valid especially when the guns are not buying the security the country needs against asymmetrical threats from within and without.

Colonel Pavan Nair ( is a retired army officer who served for 30 years in the army corps of engineers. He has seen active service in Bangladesh, Sri Lanka and Kashmir.

Considering the large size of our population, its high rate of growth, and millions living below the poverty line, the government faces serious challenges of resource mobilisation to provide adequately for satisfying even the minimum needs of our people. It is apparent that significant increases in allocations for defence in the future can be envisaged only by constricting the flow of funds to the social development sectors. N N Vohra, Former Defence Secretary

26 August 1996 (Foreword to India’s Defence Budget and Expenditure Management by Amiya Kumar Ghosh, Lancer Publishers, New Delhi, 1996. The outlay on defence during FY 1996-97 was Rs 29,505 crore).

It is obvious, however, that over the years actual defence expenditure has been below the amount required by the defence forces to perform efficiently the tasks allotted to them. This has affected the process of modernisation and has also created some unacceptable operational voids. Given the country’s resource constraints, the scope for enhancing defence outlays is somewhat limited without tightening up fiscal discipline elsewhere and ensuring a high growth rate of 6-7% for the economy. Hence, the defence services must seek to extract the maximum value from each defence rupee. This will call for some drastic measures like restructuring of the defence forces, improving cost-effectiveness of manpower, retraining and redeployment, dispensing with avoidable and unnecessary expenditure, rigorous prioritisation, and focusing resources in areas likely to enhance the effectiveness of the defence forces in meeting the emerging challenges to the country’s security.

(Kargil Review Committee Report 1999, emphasis added. The outlay on defence during FY 1999-2000 was Rs 45,694 crore.)

The Mumbai terror attacks have given an entirely new dimension to cross-border terrorism. A threshold has been crossed. Our security environment has deteriorated considerably. In this context, I propose to increase the allocation for Defence, which is a part of non-plan expenditure to Rs 1,41,703 crore. This includes an amount of Rs 54,824 crore for capital expenditure. Needless to say, any additional requirement for the security of the nation will be provided for.

Pranab Mukherjee

16 February 2009

Interim Budget 2009-10 (Defence budget in the full year’s budget of 2009-10 remained at Rs 1,41,703 crore).

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expenditure needs to be curtailed.

Opinion is clearly divided between the developmental lobby and strategic thinkers who wield influence with the political leadership. This essay will attempt to make a realistic assessment of current levels of defence spending by evaluating the efficacy and intensity of military expenditure. Indeed, some arguments have been made before, but bear repetition in the current scenario. Parliament passes the defence budget with little or no discussion. The media is largely ignorant or chooses to ignore the issue of defence spending. The view across the political spectrum and indeed the strategic community is that any exercise to limit defence spending amounts to compromising national security and is therefore not a viable consideration. Whilst it is true that development cannot take place in an insecure environment, defence expenditure (DE) in a developing country has a direct impact on the outlay on social spending. The “guns versus butter” argument is valid especially when the guns (and missiles) are not buying the security the country needs against asymmetrical threats from within and without.

In the Indian context, DE pertains to the external defence of the country by the regular armed forces. Expenditure on internal security, law and order, border management and fencing, coastal security and intelligence come under the purview of the Ministry of Home Affairs. Border roads are taken care of by the Ministry of Surface Transport and the Indian coast guard comes directly under the Ministry of Defence (MoD).

The defence budget forms the single largest item of discretionary expenditure. The outlay on defence has seen more than a threefold hike in the decade after the war in Kargil from Rs 45,694 crore in 1999-2000 to Rs 1,41,703 crore in 2009-10. (All figures pertaining to DE

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have been taken from www.indiabudget. and are budget estimates unless otherwise stated.)

During this period there has been no accretion in force levels except for the raising of an additional corps and command headquarters from within the manpower ceiling of the army and a few units and formations for manning missile systems that can be used to deliver nuclear warheads. Two mountain divisions have recently been sanctioned for deployment in the north-east but the financial impact will be felt only when the formations complete raising. Force multipliers like Unmanned Aerial Vehicles (UAVs) and satellite imagery have become available. Electronic surveillance has become available down to the unit level. The import route has been used extensively for modernisation of the three services. It is contended that excessive dependence on imports and exercising the nuclear option in 1998 has taken military-related expenditure to unsustainable levels.

The threefold increase in expenditure in the last decade is not in real terms since inflation and the depreciation of the rupee have to be taken into account. This is still a substantial hike considering the fact that the decadal growth of military expenditure worldwide in constant 2005 dollars till 2008 was 45%. This includes the so-called expenditure on the “global war on terror” which has raised US defence-related expenditure to its highest level since the second world war (Stockholm International Peace Research Institute (SIPRI) Military Expenditure Database 2009,

India is in the top 10 list of military spenders while it stands at number 132 out of 182 countries in the 2009 UNDP Human Development Index. China, the second lowest in human development in the top-10 military-spending list is ranked at number 92. Human security must surely form a part of national security. The situation on the internal security front has deteriorated considerably. This can be attributed at least in part to the poor human development parameters affecting hundreds of millions of citizens who eke out an existence at sub-human levels. India is reported to have the dubious distinction of being home to the largest number of

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indigenous terrorist organisations. State police forces are ill-equipped to handle insurgency or terror. The Naxalite threat no longer remains a menace and needs to be dealt with at various levels and not merely as a law and order problem. Coastal security is practically non-existent. This has become apparent after the unhindered ingress of terrorists using the sea route.

There are several dimensions of security which cannot be ignored. Defence budgets seldom meet the requirement of any military. There are always better weapon systems, heavier calibre guns and more lethal aircraft to be procured. Nuclear warheads, missiles, delivery and command and control systems are prohibitively expensive. Internal security which has remained neglected for several years can also consume a large share of available resources. There is thus a need to balance expenditure on internal and external security while keeping both within reasonable limits. This may be stating the obvious, but it needs to be stated.

Finance Commission

In its wisdom, the Eleventh Finance Commission (EFC) for 2000-01 to 2004-05 which submitted its report in June 2000 laid an upper limit of up to 3% of the GDP for DE. It is worth noting that the informal guideline of the North Atlantic Treaty Organisation (NATO) for DE is 2% of GDP, though several countries notably the US have crossed that limit. Para 4.17 of the EFC report states, “…aggregate defence expenditure could reach 3% of GDP by 2004-05. We would emphasise that while the required resources may be provided, all possible measures for securing economy in defence expenditure should be taken.” Official DE in 2000 was at 2.3% of GDP. The EFC also noted (Para 4.15) that the fiscal deficit was expected to fall to 4.5% of the GDP by 2004-05, thereby implying that the hike in DE over the next few years had been facilitated by the improved fiscal situation and other measures suggested by the EFC to increase the availability of funds for both capital and revenue expenditure.

The specified limit of 3% has been observed only by excluding several items like the cost of the MoD and the expenditure

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on military pensions which by itself amounts to 15% of the total defence outlay. Several other items like the Jammu and Kashmir Light Infantry (JAKLI, a regular regiment of the army consisting of 13 battalions) and the coast guard are also excluded. A substantial part of the cost of the nuclear arsenal and allied systems is excluded. All paramilitary forces including the ones directly involved in border management are excluded. The Parliamentary committee on Defence spends most of its time on personnel matters and resolving issues of protocol between the service chiefs and the defence secretary. The committee looks at DE but beyond stating that DE should be pegged at 3% of GDP, it has nothing substantial to contribute. Clearly, parliamentary oversight and control seems to be missing. For several years, DE in aggregate has crossed 3% of GDP.

Nuclear Dimension

The expenditure on the nuclear arsenal is an additional burden on the economy. It is immaterial whether or not this cost is included in the defence budget. C Rammanohar Reddy in an article in The Hindu published in 1999 argued that a poor man’s arsenal could cost anything between 0.5% and 1% of the GDP per year for about 10 years till all systems are fully deployed.

The capital cost of developing, testing and deploying systems over a period of say 10 or 12 years could be between 6% and 10% of the GDP with a recurring and maintenance cost element to be added separately. Assuming an overall cost of 8% of GDP, the total expenditure at current levels has crossed Rs 4,50,000 crore. This cost has been split over several years between the Department of Atomic Energy (DAE), the Department of Space (DOS), the Defence Research and Development Organisation (DRDO) and the army, navy and air force for delivery systems. The amount spent by each department or arm is not visible since it is merged with overall expenditure.

It is therefore not possible to compute the current cost of nuclear deterrence, which, for better or for worse, forms an important leg of the country’s strategic posture. An assessment will, however, be made subsequently to arrive at the additional amount to be added to DE which currently includes the expenditure of the DRDO which has developed missiles and the cost of their deployment in the three services. Nuclear deterrence implies deploying air, land, sea and submarinebased missiles, besides delivery systems and command centres with communications and built in redundancy. India has also opted for an anti-missile system. The overall cost of the nuclear triad, which includes nuclear powered submarines, which are under construction and procurement has had a direct impact on available fiscal space and subsequently developmental spending.

According to the defence minister, India imports 70% of its weapon systems. These include delivery and data acquisition systems like aircraft, ships and submarines which are accounted for under conventional DE. India is the second largest importer of arms after China. Certain components like the Airborne Warning and Control System (AWACS) have been procured primarily to provide early warning of a nuclear as also conventional attack. AWACS systems have been around for several decades and India is in the process of developing its own system. Having gone overtly nuclear has actually spurred the procurement of additional systems which could have been developed within the country in due course. Clearly, the option to go nuclear, besides its own costs has added to the expenditure on conventional arms. Nuclear protagonists often state that conventional spending is likely to reduce when nuclear deterrence is in place. This is certainly not the case in the subcontinent and is getting reflected in I ndian DE. We need to look at what constitutes DE.

Defining DE

SIPRI defines DE as the expenditure on armed forces (including strategic forces and military space applications), ministries and government departments engaged with the armed forces (defence accounts, estates, canteen), military accommodation, land and facilities, pensions, research and development, paramilitaries trained and equipped like the regular army as well as military aid in terms of peace-keeping forces and equipment given to other countries.

DE excludes the cost of civil defence, disaster relief and military aid received. This definition has been accepted by most countries across all continents with minor variations and forms the basis of reporting of military expenditure.

Developing countries tend to report lower DE since developmental aid is linked to the quantum of such expenditure. This is achieved by showing legitimate items of expenditure under several heads outside the defence budget. Costs of ministries and accounting departments are generally excluded. Expenditure on military pensions which amounts to 10% to 15% of official DE is excluded by several countries including India (since 1985) and Pakistan (since 2000). Arms imports can be paid for by barter or off the defence budget. Pakistan excludes capital costs. The rupee deal concluded between India and Russia during the early 1990s was primarily a defence deal but was shown as a bilateral commercial agreement. Defence equipment (tanks, guns, ships, aircraft) worth $10 billion (at 1990 rates) was supplied over two decades in exchange for goods exported to Russia. The entire amount was added to the external debt. The rupee deal was negotiated under favourable terms; however a substantial amount of money was excluded from legitimate DE for several years. The rupee deal has run its course, so higher levels of expenditure have now started showing up in the defence budget.

The cost of military pensions in 2009-10 is Rs 21,790 crore (budget estimates). This was the entire outlay on defence till as late as 1993-94 and excludes the further hike in pensions announced in the budget for personnel below the officer rank, amounting to Rs 2,100 crore. The cost of the MoD which includes the outlay on the JAKLI and the coast guard, as also the defence accounts department, canteen department and its own secretariat is Rs 3,170 crore. Both these items taken together (defence services estimates, civil) are debited to several sub-heads under the “General Services” head. The CPMFs involved in border management, an important aspect of external security (Assam Rifles, Border Security Force, Indo-Tibetan Border Police, and the Sashastra Seema Bal or SSB) cost Rs 11,397 crore. These forces come under

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the operational control of the army during war just as the coast guard comes under the control of the navy. This cost along with the cost of other paramilitary forces is debited to the “Police” sub-head within the “General Services” head.

As stated earlier, it is not possible to compute the cost of the nuclear arsenal but post the nuclear deal, we are aware that 35% of reactors are for military use, therefore the cost to be added to the defence budget could be assessed by adding 35% of the budget of the DAE and the DOS which is also responsible for the development and testing of longer range ballistic missiles and satellites for military purposes. This amounts to about Rs 4,456 crore. This is a conservative estimate. Thus, the official defence budget amounting to Rs 1,41,703 crore excludes an amount of Rs 40,813 crore or 29% of the allotment. DE in the aggregate amounts to Rs 1,82,516 crore which is above the 3% GDP limit specified by the EFC. Unfortunately, defence analysts ignore this aspect when discussing the defence budget. Splitting DE amounts to obfuscation and should be avoided since it can confuse planners and parliamentarians alike.

In addition, the cost of border fencing, border roads and military aid to several countries like Afghanistan, Tajikistan, Nepal and Bhutan running into thousands of crores is shown in the expenditure of various other departments and ministries. The fiscal deficit which is expected to hit 6.8% in FY 2009-10 is bound to rise further since defence equipment worth over $20 billion or 1.65% of GDP is already in the pipeline or has been cleared for procurement using the import route.

Classification of DE

The British abandoned the system of budgeting being followed in India a few decades ago and adopted a functional system in which accounting is done not only by service but by command functionality. Thus “British Forces in Iraq” is a separate head. The expenditure in each theatre of operations is visible and can be assessed. If we need to check the expenditure say in the Siachen sector or on counter-insurgency operations in the Kashmir Valley, it would need a major exercise. In fact, the first head of account in the British system is

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“Strategic Nuclear Forces” under which each aircraft, ship, submarine and missile along with warheads and manpower is accounted for.

The current system of budgeting is purely incremental and depends on how much money the finance ministry can make available or how much pressure the defence minister can exert on his counterpart in North Block. This has resulted in ad hoc allotments being made to the services which individually project inflated requirements which are never met. This becomes clear by observing flat-rate increases over the previous year’s budget estimates.

There was a 10% hike in the budget estimates for DE for 2008-09 (Rs 1,05,600 crore) from 2007-08 (Rs 96,000 crore). Similar hikes have been made for several years. The unprecedented hike of 34.2% this year over last year’s budget estimates is mainly on account of the implementation of the report of the Sixth Pay Commission. Revenue or recurring expenditure takes care of salaries and maintenance and like pensions is a fixed cost. This can be worked out in advance. It would be better if the MoD could indicate the amount of capital funding available service wise for modernisation for say five years so that the service chiefs could plan accordingly. This can also take into account the expenditure on internal security and developmental schemes over the same period. This is an exercise which the National Security Council (NSC) should undertake. Larger procurements like the 126 multi-role combat jet aircraft deal could be factored in separately. Ideally, a long-term perspective plan should be accepted in advance. Such plans exist on paper but have been ignored by governments across the board since i nter-service priorities cannot be decided and resource-mobilisation is always a problem. The plans remain internal projections of the services made to the MoD.

Classification of DE as a percentage of the GDP does not bring out whether the money is being spent efficiently; or given a particular force level, is adequate or inadequate. It also does not reflect the growth of DE if GDP expands over a period of time. India has seen substantial growth over the past several years. Pakistan spends a higher percentage of its GDP on defence; however when we compare the combat potential of

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the two armed forces in terms of manpower, tanks, ships, aircraft and artillery, Pakistan’s unit spending per combat soldier or tank or ship is much lower. This aspect is examined in a subsequent paragraph. Besides efficacy (“bang for the buck”), the intensity of DE (overall share or burden) does not get reflected in its representation as a percentage of GDP.

It would be better to comvastly between countries. This is especially applicable to developing countries like India where goods and services are much cheaper than the developed world. For instance, the cost of equipping, training, paying and maintaining a soldier is about a third in India compared with the US. Similarly, money spent for importing military equipment would buy a much larger

Table 1: Military Expenditure in Current/PPP ($ billions)

pare DE as a percentage of the

Current % GDP % Share PPP % Share (2008) (2007) (World) (Top-10)

total budget rather than cen-

USA 607.0 4.0 41.5 USA 607.0 46.0

tral government expenditure.

China 84.9 2.0 5.8 China 201.8 15.3

In this case, it emerges that

France 65.7 2.3 4.5 Russia 130.1 9.9

whereas India and Pakistan

UK 65.3 2.4 4.5 India 90.2 6.8

spend between 15% and 25%

Russia 58.6 3.5 4.0 Saudi Arabia 59.4 4.5

of the total central outlay,

Germany 46.6 1.3 3.2 France 57.2 4.3

China spends about 7.5% Japan 46.3 0.9 3.2 UK 55.3

(“Chinese White Paper on De-Italy 40.6 1.8 2.8 Germany 41.9

fence 2008”, see “China’s Na-Saudi Arabia 38.2 9.3 2.6 Japan 39.3

India 30.0 2.5 2.1 Italy 37.3

tional Defence in 2008” at

Top 10 total 1083.2 74.0 1319.5 100.0 Defence

World total 1464.0 2.4 100.0

analysts question the trans-

Source: SIPRI Military Expenditure Database 2009 for market rates, percentage of parency of the Chinese DE but GDP and share of world expenditure. Data pertains to expenditure for 2008 and includes military pensions and allied costs as estimated by SIPRI.

it must be stated that China’s

SIPRI is of the view that using PPP data for military expenditure has limited relevance. DE for India for 2009 including defence services estimates (civil) and

human indicators are way

defined military costs is about $38 billion at Rs 48 to a dollar.

ahead of India and Pakistan and it can actually afford to spend an even higher proportion of its budget on defence, which it does not. Clearly, both the efficacy and intensity of Indian DE needs review.

It is not in anyone’s interest that the country has a weak or ill-equipped army, navy and air force but there is need for oversight, economy and prioritisation. This was stated unequivocally by the Kargil Review Committee (KRC) in its report (Para 9.24 quoted above). Unfortunately, the group of ministers seems to have overlooked this aspect. The KRC was competent to make specific recommendations regarding restructuring and wasteful expenditure but chose not to do so. That the KRC stated that drastic measures were required for the efficient utilisation of the defence rupee, amounts to a severe indictment of the state of civil-military affairs. It would be interesting to obtain the views of the members of the KRC on the current levels of defence spending.

Purchasing Power Parity Argument

Comparison of military expenditure at market exchange or current rates does not give a correct picture since the cost of manpower, equipment and training varies

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basket of civil goods locally. Table 1 indicates DE of the top 10 military spenders for 2008 at both market or current rates and purchasing power parity (PPP) rates and as a percentage of national GDPs for 2007. Also included is the overall percentage share of these countries in world military expenditure and percentage expenditure within the top 10 in PPP terms. Conversion to PPP rates has been done using I nternational Comparison Programme data (benchmark year 2005), available at the World Bank web site,

The top 10 countries incur 74% of total military expenditure. Within the top-10 countries, there is a vast variation of expenditure in absolute terms as well as GDP terms ranging from 0.9% to 9.3% of national GDP. Typically, smaller west Asian countries incur much higher expenditure in GDP terms. According to SIPRI world military expenditure has been hovering at about 2.5% of GDP; however the US contribution is very high (41.5%) and boosts the average figure. Thus, military expenditure for the rest of the world amounts to 1.85% of GDP. Indian DE for 2008 at 2.5% of GDP is much higher than this figure. Our estimates are that the current spending for 2009-10 is 3.15% of GDP (PPP rates). At current market rates, India is at number 10 in the list whereas at PPP rates, India is at number four which is in keeping with the fact that it has the third largest army, the fourth largest air force and a blue water navy. India’s DE for 2008 is $90 billion at PPP rates and is touching $115 billion in the current year. Whether this level of expenditure is justified is a matter for civil society including the strategic community to consider.

Indian DE amounts to 2.1% of world military expenditure. Within the top 10 countries, this amounts to 6.8% at PPP rates and 12.65% if US spending is ignored. Analysts point out that India’s per capita military expenditure is very low, in fact the lowest in the list above. This is true for current as well as PPP rates but is considered a specious argument when Indian DE is compared with other items of public spending.

Priorities in Public Spending

The Human Development Report 2008 ( indicates the level of public spending in health, education and defence. The expenditure includes federal as well as regional or state expenditure. Table 2 indicates expenditure of selected countries as a percentage of GDP under the three major heads. All figures have been extracted from Table 19 of the UNDP report. To compare the data, intra-country

Table 2: Public Expenditure (% of GDP) and Ratios Thereof

Country HDI Health Education Defence Total H/E H/D E/D Rank (H) (E) (D) poverty would be halved by

USA 12 6.9 5.9 4.1 16.9 1.16 1.68 1.43

2014. This will involve lifting

UK 16 7.0 5.4 2.7 15.1 1.29 2.59 2.00

about 100 million people above

Argentina 38 4.3 3.8 1.0 9.1 1.13 4.30 3.80

the poverty line in five years if

Russia 67 3.7 3.6 4.1 11.4 1.02 0.90 0.87

we use Planning Commission

Brazil 70 4.8 4.4 1.6 10.8 1.09 3.00 2.75

norms. This seems highly un-

China 81 1.8 1.9 2.0 5.7 0.94 0.90 0.95

likely at current levels of

India 128 0.9 3.8 2.8 7.5 0.23 0.32 1.35 Data for health pertains to 2004. Data for education and defence expenditure health expenditure. The fresh pertains to 2005. The expenditure on health in India is still at about 1% of GDP,

allocation for central govern

central government expenditure being 0.4%.

ratios of the three major heads have been calculated. Argentina has been included as a special case being a country which graduated from medium to high human development. The countries are listed in descending order of rank in the Human Development Index (HDI).

There is considerable variation in public spending on health, education and defence between the developed countries (US and UK) and the large developing countries. This is primarily due to the higher cost of goods and services as discussed above. However, ratios between heads can be directly compared.

The health to defence (H/D) ratio varies considerably between countries. The higher developed countries have a much higher ratio indicating that allocation for health is several times more than the allocation for defence. In the case of India, the ratio is not only the lowest but also about a third of the ratio of the next lowest that is China, which is also the next lowest in the list in human development. Health expenditure needs to be hiked by 300% to about 3% of GDP to reach the levels of China. It appears that expenditure on health has been suppressed due to much higher allocations made to both education and defence. The education to defence (E/D) ratios also vary considerably. India is at number five of the seven countries in the list. This perhaps indicates that there is a need to reduce DE since the spending on education seems adequate.

The total per capita expenditure on health (central as well as state expenditure) is about a third of the per capita expenditure on defence. This low level of funding is the prime reason for poor health parameters, which, in turn, keeps a large proportion of the population in perpetual debt and poverty. The finance minister in his budget speech has stated that the proportion of

ment spending on health in the current year is Rs 22,641 crore or merely 0.4% of GDP.

India-Pakistan Equation

The armed forces of both the countries are organised, trained and equipped in a s imilar fashion; hence defence-related e xpenditure which is a function of combat power can be compared by a comparison of force levels. Force levels evolve over a

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period of time depending on threat perceptions. India has vast land and sea frontiers to guard and therefore needs greater combat power in terms of manpower, tanks, guns, ships and aircraft. Table 3 i ndicates manpower levels and major items of armament of the two countries.

Table 3: Major Items Contributing to Combat Power (2008)

Item India Pakistan Ratio

Active manpower 1.288 million 0.619 million ~ 2:1

Tanks 4,059 2,461 1.65:1

Guns 4,500 1,629 2.75:1

Combat aircraft 565 360 ~ 1.6:1

Ships/submarines 26/16 6/8 3:1

Source: Indian Defence Yearbook, 2009 (ed Lt Gen R K Jasbir Singh) (Dehra Dun: Natraj Publishers).

It will be seen that though the ratios vary between 1.6:1 and 3:1; it would be prudent to take an overall figure of 3:1 since larger armed forces have larger establishments, inventories and tails. This will also be erring on the safe side. Weightage between different items is being ignored though the overall allocation to both armies is much higher than the other two services. This is an indicative ratio, which also covers several other items like aircraft carriers, infantry fighting vehicles, naval aviation, transport and training aircraft, helicopters, self-propelled artillery and nuclear capabilities not included above. An alternative methodology would be to compare the number of combat units like infantry battalions, armoured and artillery regiments and combat squadrons. This would, however, yield a comparatively lower ratio since inventories and establishments have a financial impact.

Table 4 (p 45) shows the heads of military expenditure of the two countries. DE in Pakistan is much less transparent and excludes several items including capital costs, pensions and nuclear-related costs. In addition, foreign military aid which adds to defence capability is excluded. An assessment has been made of these items. Current exchange rates have been used to convert respective currencies into US dollars.

The ratio of DE between India and Pakistan works out to 4:1 when their combat ratio is at 3:1. Though Pakistan is spending a much higher proportion of its GDP on defence, it is getting more “bang for the buck”. Note that costs of the MoD, paramilitaries and nuclear systems have been excluded for both countries. If India were

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Table 4: Heads of Expenditure (2009-10) clear that state police forces
Item India Pakistan were neither equipped nor
Federal/central budget Rs 10,20,837 crore ($212.67 billion) Defence budget 2009-10 Rs 1,41,703 crore ($29.52 billion) Rs 2,48,230 crore ($31 billion) Rs 34,300 crore ($4.28 billion) trained to tackle terrorism. Law and order being a state subject, it was rightly appreci-
Capital expenditure Rs 54,824 crore $2.56 billion ated that resources available
included above (60% of above) with the states were inade-
Military R and D Pensions Included in DE (3.3% of DE) Rs 21,790 crore $0.24 billion (3.5% of DE) $1.02 billion quate to meet the requirement of procuring automatic weap
($4.53 billion) (15% of DE) ons, as also bomb disposal and
Foreign military aid Nil $0.4 billion protective equipment. This was

Total $34.05 billion $8.50 billion reinforced in a big way when (16% of union budget) (27.5% of federal budget)

terrorists struck Mumbai. Lathi

% of GDP 2.7% 4.6%

wielding policemen had to

Exchange rate Rs 48/$ (India) and Rs 80/$ (Pakistan). Information of Pakistan federal spending has been taken from the web site www. grapple with terrorists armed

to spend at the rate of Pakistan, it would result in a saving of $8.5 billion or Rs 40,800 crore. This is a significant sum of money amounting to 0.7% of GDP and is nearly double the allocation for federal spending on health. A saving of even half this amount would be significant.

The reason for a higher rate of expenditure per combat soldier, tank or ship needs to be assessed. Larger inventories, too many headquarters and establishments, ceremonial units, bands and air display flights of fixed and rotary wing aircraft are only a few areas which need to be looked at. In addition, manpower utilisation and rationalisation needs examination.

Pensions have been rising exponentially. If the retirement age of soldiers subject to their being medically fit is raised to 45 years, a significant amount of money could be saved. Pensions should be payable only after completing 20 years of “colour” service. In the US army, the age of retirement from active service for enlisted soldiers, which was 55 years has now been raised to 62 years. However this has also been done to enable late entrants to complete 20 years of pensionable service. It is interesting to note that the official allocation for the Pakistan defence budget falls short of the expenditure on military pensions paid by India even though the overall percentage spending on defence is much higher. The entire outlay of the Pakistan budget is well below India’s outlay on defence spending.

Internal/External Security

During the tenure of the NDA government, a separate head of accounts was created for police modernisation. It had become

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with automatic weapons. It has become obvious that allocations made over the years were inadequate to meet even minimal requirements. The amount allocated during 2008-09 was a mere Rs 1,340 crore. Even this amount was not fully utilised. Post Mumbai, this was increased to Rs 1,815 crore in the 2009-10 budget. DE was hiked by Rs 35,000 crore. Police modernisation continues to be neglected.

Coastal security has been ignored at the country’s peril. In 1993, the sea route was used to land explosives for the Bombay blasts. In 1994, under the United Nations Convention on the Law of the Sea, the exclusive economic zones (EEZs) of littoral countries were extended from 100 to 200 nautical miles. India ratified UNCLOS III in 1995. The coast guard which is responsible for the EEZ was thus required to cover a much vaster area with the same resources. Over the years, ships and aircrafts have been acquired but with some 80 vessels and 50 aircrafts, guarding an EEZ of over two million square kilometres is a near impossible task. The navy being the senior service should have been given this r esponsibility with the resources of the coast guard under its command. A blue water navy is of little use when the seaboards remain unprotected. The resources of the states and the local marine police need upgrading. The concept of making the marine police entirely responsible for waters which extend to five nautical miles

(9.25 km) needs a re-look. There is a need for integration between internal and e xternal security and defence on both the land and sea frontiers.

Force levels of the central paramilitary forces (CPMFs) have been rising steadily

vol xliv no 51

and it is expected that a million men will be under arms by the end of the next financial year (2010-11). The threat posed by the Naxalite insurgency has been gaining momentum. Merely deploying additional forces will not resolve the issue and will result in militarisation of the state. Development of infrastructure, creation of employment and improving health parameters should be undertaken on priority. CPMFs deployed in these areas must also have access to resources which can be used to win over hearts and minds by constructing schools and health centres. Op-Sadbhavana conducted by the army in Ladakh and Jammu and Kashmir is an excellent example of security forces getting involved in development.

Defence Production

India with the third largest Army in the world, the fourth largest Air Force and a blue water navy is today a doubtful regional power due to its weak economy and dependence on imports of armaments…The danger is that with the thaw in our relations with the USA and our craze for new gadgetry, we could easily fall into the laps of salesmen. Hard thinking is necessary before we keep changing our technology base.

Sam Manekshaw

Field Marshal

Coonoor 1994 (In a foreword to Indian Arms Bazaar by Maj Gen Partap Narain, Shipra Publications, New Delhi, 1994)

Defence production and procurement is a major area of concern. There are 39 Ordnance Factories and eight public sector undertakings (PSUs) employing over 3,00,000 workers producing ships, tanks, guns, helicopters and fixed wing aircrafts besides ammunition, boots and tents. Yet, we import the bulk of our cutting edge weaponry. Production capacities are not being utilised. The cost of items is borne by the services from within the defence budget. Some items produced by ordnance factories are more expensive than the cost of imports. The Arjun tank powered by a German engine, developed by DRDO and now being manufactured at Avadi is one such item. The Light Combat Aircraft or LCA, when inducted will be another. D efence PSUs like Bharat Electronics L imited (BEL) and Bharat Earth Movers Limited (BEML) make higher profits since their products are used by sectors other than defence. However, defence PSUs even while showing nominal profits need heavy capital investment, which comes from the PSU pool. Thus the real cost of defence production does not get reflected in DE. Some of the ordnance factories can be closed down and the equipment can be manufactured by the private sector. This is difficult to implement since defence w orkers form a fair-sized vote bank and have strong unions. The state, therefore, continues to subsidise the inefficient use of r esources at the cost of developmental spending.

The DRDO establishment needs major overhaul. The P Rama Rao Committee (2008) has made several recommendations. Large establishments not producing worthwhile results need to be pruned. There have been a few success stories like the Agni series of missiles. The DRDO works in isolation and the services tend to disregard its capabilities. Some laboratories could be merged to make the organisation more cost-effective. This is a subject for evaluation after the implementation of the Rama Rao Committee Report. The DRDO took up Rs 4,757 crore which was 3.3% of the defence budget in 2007-08. In addition, an amount of Rs 3,723 crore has been charged to capital expenditure which is a combined head for the three services for equipment development and delivery.

The forces prefer import to indigenous production for a variety of reasons including the inability of the DRDO to meet qualitative requirements (QRs) and the inordinate delay in the production of the equipment. The forces themselves must take a part of the blame for projecting unreal requirements. This does not happen when the import route is used since QRs are formulated to conform to the range of equipment available. Weapon systems have a life cycle of about 20 years, which gets written down if it takes 10 years to produce the equipment. Politicians and bureaucrats, both civil and military, prefer the import route especially from western countries for extraneous reasons. The Defence Procurement Procedure (DPP) has been streamlined, yet an important aspect like offsets has yet to yield the required dividends. The problem of middlemen has been resolved by foreign suppliers opening offices in New Delhi. There has been a proliferation of defence glossies supported diectly or indirectly by arms manufacturers.

India has become a hub of the world’s arms bazaar. Little wonder that foreign manufacturers want a hike in the 26% foreign direct investment (FDI) limit i mposed on joint ventures in the defence sector.


Besides external defence, internal security and human development form a vital part of the overall security and well-being of the nation. Is the defence rupee being spent wisely? The answer is in the negative both in terms of quantum and efficacy. DE has risen to unsustainable levels in the last decade primarily on account of dependence on imports and nuclearisation. There is a trade-off between defence and developmental spending specifically in the area of health, which becomes visible in poor human development parameters like infant mortality rates and child malnutrition. Bangladesh is ahead of India in these parameters. Internal security has been neglected for too long. There is a need to balance overall expenditure to meet the challenge of the emerging economic and strategic scenario. Force levels need to be reviewed. Like obsolete equipment, obsolete organisations should be dispensed with. The army has become equipment and staff-oriented. It also remains manpowerintensive with too few junior officers and a large tail. The Thirteenth Finance Commission could look into aspects of internal and external security to come to a reasonable limit for both. It would also be expedient if the Commission specifies what constitutes defence spending and whether defence services civil estimates should form part of defence expenditure.

The effects of the global recession are still to play out. Oversight, therefore, needs to be exercised in all areas of government spending. There is no scope for empire building. The plan to send two men into space at a cost of Rs 12,500 crore is an example of incorrect priorities. The defence forces form an important part of the nation’s fabric, yet they must not be a drain on its limited resources. For the armed forces, the country comes first, always and every time and they will rise to the occasion as always. The political leadership must, therefore, take the service chiefs into confidence with regard to the fiscal situation. With global warming on the horizon, floods, droughts and severe cyclonic storms will occur with increasing frequency. Water is going to be in short supply. These are only some of the challenges which the country and its armed forces will face in the not too distant future. Wars as we have known them will more often be avoided. Hence the need for a lean armed force, a well-equipped and trained police force and state policy, which will deter a potential aggressor from posing a conventional, nuclear or asymmetrical threat. Only then can the war against poverty and hunger be won.


October 31, 2009

The Law, Gender and Women ‘Nonconformity Incarnate’: Women with Disabilities, ‘Gendered’ Law and the Problem of Recognition Indian Muslim Women, Politics of Muslim Personal

Law and Struggle for Life with Dignity and Justice Bringing Rights Home: Review of the Campaign for a Law on Domestic Violence Conjugality, Property, Morality and Maintenance Women, Forestspaces and the Law: Transgressing the Boundaries Women’s Land Rights in South Asia: Struggles and Diverse Contexts

Outside the Realm of Protective Labour Legislation: Saga of Unpaid Labour in India Judicial Meanderings in Patriarchal Thickets: Litigating Sex Discrimination in India

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