Home' Defence Review Asia : DRA May 2013 Contents little money available for the 'new schemes' (or new
contracts). For instance for the years from 2011-12
to 2012-13, the overall ratio between the committed
liabilities and new schemes stands at roughly 85:15.
Assuming the same ratio for the new allocation, total
available funds for the new schemes would be little
over $2.0 billion, which is probably enough for the
first stage payment towards the Rafale deal.
This means there is a very little money available
for new schemes including of the Air Force, which
despite having a 30% hike in its modernisation
budget would still need more money to sustain
its modernisation drive. The attack and heavy lift
helicopter programmes and the tanker deal may be
postponed, if additional money does not come forth.
For the Army and Navy, the resource constraint
is more severe, with the negative growth in their
respective modernisation budgets. Between the
latter two, the Navy is likely to face the resource
crunch more. A part of its last year's modernisation
budget, which remained unutilised due to the
postponement of delivery of Admiral Gorshkov,
would be paid this year. Considering that Navy has
already placed orders for construction of over 40
ships (for which substantial part of its modernisation
budget will be used), this leaves little money for
signing new contract.
Service Modernisation Budget (US$ Billion) % Growth
Air Force 6.80
NO HEADWAY IN 'MAKE' PROJECTS
In one of the major policy measures taken in recent
time, the ministry of defence incorporated a 'make'
provision in its defence procurement procedure
(DPP) of 2006. The provision is intended to
stimulate domestic defence industry, by way of
placing contracts on local enterprises and funding
the developmental cost up to 80%. Over six years
down the line the 'make' provision is still in the
policy domain with no major contract in place to
make it effective. This is evident from the utilisation
and allocation of resources for the 'make' projects.
Of the total allocation of $16.4 million made in
2012-13, not a single pie has been utilised so far.
Moreover, the allocation has been further reduced
to a mere $0.2 million in the new budget, implying
that no major work can be undertaken for the two
army projects -- Tactical Communication System
(TCS) and Future Infantry Combat System (FICV) -
which have been indentified for development by the
WIDENING GAP WITH CHINA
Just days after India announced its $37.4 billion
defence budget, China announced an 11% hike
in its 2013 defence budget which now stands
a staggering total of $115.7 billion - which is
second largest military budget after the US's (to
many outside observers, China's actual defence
spending is much more than the official estimate.
The US Department of Defence in its annual review
of China's military capability estimated Beijing's
2011 defence spending at $120-180 billion which
is almost twice bigger than Beijing's official figure
of $91.5 billion for that year). From the Indian
perspective what is worrisome is not only the
magnitude of difference between two countries'
defence budget but also the pace at which China
has sustained its military budget in the past two
decades or so. According to the Stockholm
International Peace Research Institute (SIPRI),
Beijing's military expenditure in real terms has grown
by 620% between 1990 and 2011. In comparison,
India's military spending has grown by 152%.
Consequently, the gap between the two countries'
military spending which was almost negligible in
1990 has been widened by a factor of over three
in favour of Beijing. Consequently while China has
a military capability which is increasingly becoming
state of the art, India is still struggling to replace a
vast majority of weapon systems procured in the
seventies and eighties.
This is not the first time that the defence budget
has been subject to a modest growth. In 2010-11
the budget was hiked by a mere 4%. However in
that year, the actual expenditure surpassed the
budgetary allocation by 5%, and the next year saw a
hefty 12% increase in allocation. Going by this, the
defence ministry would not only eye for additional
resources over the budgetary allocation of 2013-
14 but also expect a double-digit hike in 2014-15.
However the expectation may bump into one crucial
hurdle. Unlike the previous years in which the
Indian economy was on a high growth trajectory,
reaching a GDP growth of 9.3% in 2010-11, the
growth in the coming years is not that encouraging
although some better results are expected. As the
International Monetary Fund in its October 2012
report predicts, the best that the Indian economy
can achieve in the years up to 2017 is 6.9%.
GDP growth of less than seven per cent combined
with fiscal consolidation path that the Finance
Minister has articulated in his budget speech means
a lot of pressure for the defence ministry - whose
plan of expenditure for the 12th five year plan (2012-
2017) is based on past GDP growth of 8-9%. Given
this, a mismatch of huge proportion is expected
in the coming years between the allocation to and
expectation by the defence ministry. One of the paths
that the defence ministry is now expected to do is to
rework its future expenditure based on the current
reality. This would mean a bit of reprioritisation of its
main items of expenditure, which is easier said than
done given the absence of an institutional mechanism
to do the exercise in a holistic manner. The Chief
of Defence Staff (CDS) which was supposed to
undertake this vital task is yet to be set up, although
more than a decade has been passed since it was
recommended by the high-profile Group of Ministers
in 2001. Ù
Indian air force M-2000 Mirage (foreground) as a U.S. Air Force F-15 Eagle takes off.
Credit: USAF / Keith Brown
32 DefenceReviewAsia | MAY 2013
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