Union Budget 2009 and what it means for foreign affairs and defence
In the July 20th issue of Outlook magazine I point out that the Budget has the good, the bad and the ugly for strategic affairs. An edited version of the following appeared in print.
First the good: the UPA government used the Union Budget to strengthen India’s leverage in Sri Lanka by setting aside Rs 500 crore for the rehabilitation of the Tamils displaced by war. It has increased the foreign aid outlay for Nepal to Rs 238 crore, set aside Rs 125 crores for Mongolia and increased outlays for African and Eurasian countries by various amounts. This is in addition to sustaining the massive assistance to Bhutan (Rs 961 crore) and Afghanistan (Rs 442 crore). The foreign ministry’s overall budget has been increase by 24%, which should help Indian missions raise the game in foreign capitals.
Similarly, the increased outlays in several areas under broad rubric of national security—including defence, police, paramilitary forces, space and atomic energy—should be useful in securing the nation in an increasingly volatile geopolitical environment. The allocation of between 2% to 3% of GDP (depending on how defence expenditure is defined) even while massively expanding social sector expenditure programmes assigns substantial resources for defence while sending a signal of the size and strength of the Indian economy.
India, in its own conservative way, appears to be strengthening its diplomatic and military capacity in line with its status as an emerging power.
But only partly, because there is the bad. Continue reading My op-ed in Outlook: The buck yes, but where’s the bang
Planned spending, informed planning
Sushant K Singh and Ramavtar Yadav make a case for police reforms in today’s Mint.
Social and economic security needs to be immediately adopted as one of the Plan sectors by the commission. This sector should set national objectives and provide assured resources—funds, manpower, equipment and training—for policing and encompass crimes, crimogens, criminal justice system (CJS), police organization, correctional services and judicial service.
There have been incessant calls to discard the archaic system of centralized planning and the distinction between Plan and non-Plan accounting, which has many drawbacks. In the present scheme of things, however, a Plan scheme acquires priority and urgency by virtue of being a Plan item of expenditure. A very elaborate process governs the fixing of Plan expenditure by the government and the commission. Non-Plan expenditure suffers from a lack of cost consciousness, no medium-term perspective for continuing activities and allocations, lack of macropolicy knowledge at the level where budget estimates are made and lack of feedback on performance and results. The underlying logic of identifying and channelling resources into core sectors through planned expenditures will provide policing with the necessary legitimacy, urgency and impetus in the present government set-up. [Mint]
They also call for a national crime survey that can form the basis for planning. If that sounds like common sense to you, isn’t it shocking that the current approach lacks it?
Regarding freezing defence expenditure
Your decision to freeze Pakistan’s defence expenditure as “a show of its desire for peace with neighbours” is welcome. We even hope that you will someday be able to control that budgetary head.
You also hoped “to see a reciprocal gesture from our neighbour for the sake of peace and prosperity of the region”, which we are told is an “obvious reference to India.” While your sentiments remain worthy of praise you should have also asked your neighbours to the North and to the West to reciprocate too. It’s a pity you didn’t.
Listen to the voice of the revolution
Pragati will be available in a specially produced podcast edition, from April 7th onwards. It will provide a broad overview of the articles in the month’s issue of Pragati. Mohit Satyanand, your host, will read out key segments from the articles. You’ll be able to listen to the podcast online or download the podcast in MP3 format.
Here’s a sample track Mohit recorded last month. The purpose was to make sure that the technology works as intended. Unlike the the podcast edition of Pragati here he just reads one article from last month’s issue.
To listen to it you’ll need Flash enabled on your browser and a broadband connection for optimum listening experience. You can also download the file onto your computer.
Tell us what you think.
The unkindest cut Salil Tripathi
The loan waiver keeps poor farmers where they are
Waiver of mass debt Vijay Mahajan
How that money could have been used to really change lives
Concerning senior citizens Mukul G Asher &? Deepa Vasudevan
Budget 2008-09 and the implications for a greying population
Waiting for modernisation Sushant K Singh & Nitin Pai
The dismal state of long term defence procurement planning
On the arms race in outer space
Foreign aid to Afghanistan; Water and climate change
Dealing with China’s power projection Harsh V Pant
A rising China will not tolerate a rising India as a peer competitor
It matters what generals say K S Madhu Shankar
The army chief’s worrying remarks on the India-China border
Options in Sri Lanka T S Gopi Rethinaraj
And the risk of Sri Lanka falling sway to outside powers
New language formulas Sujay Rao Mandavilli
From an unsatisfactory compromise to a liberal decentralisation
Tagore in China Stephen S Hay
Edited excerpts from Asian Ideas of East and West
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Defence budgeting and procurement processes need a overhaul
That the procurement process is holding back defence modernisation is relatively well-known. In today’s op-ed in Mint, Sushant and I throw more light on another aspect: only a small fraction of India’s defence budget is available for modernisation.
Putting resources to better use.
Effective use of money by the Armed Forces needs an overhaul of the budgeting and procurement processes
As expected, the defence budget for 2008-09 has crossed the Rs1 trillion mark. After adjusting for inflation, this constitutes an increase of only 5%. For the first time since the early 1960s, India’s defence outlay has declined to less than 2% of the gross domestic product (GDP)—a sign of the chasm between the rhetoric and reality on national security…
India’s transformation into a middle-income country requires its Armed Forces to be more capital-intensive. Yet only around 10% of the defence budget is actually available for modernization, compared with around 30-40% in developed countries.
…nearly two-thirds of the amount for capital acquisitions from foreign suppliers, too, is pledged for assured and received deliveries. Payments for major defence purchases from foreign vendors are spread over a number of years. This year, India will pay instalments for earlier purchases such as the Sukhoi aircraft, the Gorshkov aircraft carrier, T-90 tanks, Talwar-class frigates, Scorpene submarines and for many other smaller contracts. Thus, only Rs8,000-9,000 crore ($2 billion) is available for new acquisitions this year.
The initial down payment on new acquisitions is generally around one-fourth of the total cost. So, the defence ministry can theoretically sign contracts worth $8 billion for new equipment this year. Capital allocations for coming years will then have to cater for instalments of these acquisitions. Despite returning more than Rs4,200 crore, the ministry will be asking for additional capital allocations this year; it justifiably believes that allocations already made will be largely used up by earlier contracts.
Defence modernization is based on a long-term integrated procurement plan (LTIPP) of the defence services. LTIPP for 2007-22, spanning the 11th, 12th and 13th Plans, is scheduled to be approved by the Defence Acquisition Council by October 2009. Going by the past record, it doesn’t signify much. The 10th defence plan was never approved by the finance ministry, and two years into the 11th Plan, it also hasn’t been approved so far. Instead, the finance minister has agreed to an annual increase of 10% during the 11th Plan. [Mint]
The defence ministry surrendered 10% of its capital allocations last year
In the Union Budget 2008-09, unveiled by Finance Minister P Chidambaram in parliament today, the budgeted capital outlay for defence services has been increased from Rs 41,922 crore to Rs 48,007 crore, by around 14.5%.
That’s good news for military modernisation. If the albatross-like procurement policies would actually allow this money to be spent. Of the Rs 41,922 crore outlay in last year’s budget, the actual spending was only Rs 37,705 crore. In other words, the defence ministry surrendered just over 10% of its allocated capital budget because it couldn’t spend it. Significant among the spending shorfalls were: the Indian Air Force’s Rs 1843 crore and the Army’s Rs 940 crore under the head “Other Equipment”.
With the government showing no real signs of reforming defence procurement we can expect a similar shortfall this year.
War is too important a business to leave to the generals alone (notwithstanding Nehru-Krishna Menon)
In an editorial earlier this month The Pioneer called for the Army to be left alone, for there ‘are other ways to save money’. It is an excellent example of good intentions but poor policy thinking.
For some time now strategic affairs ‘experts’ and their political mentors, known for their proximity to the Washington establishment, have been peddling the theory that India needs a technology-intensive ‘lean-and-mean’ Army, not a large force of 11 lakh soldiers and officers.[via Bharat-Rakshak Forum]
The Pioneer gets off the mark on a very wrong note. It is presumptuous for it to not only cast aspersions on the expertise of those who have a different point of view but question their motives. We may be experts-in-quotes, but to the best of our knowledge Sushant Singh and I—who have argued for a more technology-intensive Armed Forces—are rather far away from Washington. The larger point here is that a sensible debate over making the Armed Forces more effective is impossible if one begins by questioning the other’s patriotism. Continue reading Don’t leave the army alone
Time to stop putting the defence rupee in so many different pigeonholes
In our op-ed in Mint, Sushant and I argue that to convert defence outlays into outcomes, it is necessary to consolidate defence expenditure under one head.
The guns and butter trade-off
It’s time for India to review its outdated practice of obfuscating the true defence expenditure
Finance minister P. Chidambaram’s Budget speech on 29 February will be more than two hours long, but an expense item of more than Rs1 trillion will be covered in a couple of minutes. Defence expenditure is the second largest item of non-planned expenditure. It was covered in 34 words last year. Continue reading My op-ed in Mint: Clarity in defence expenditure