What India should learn from Beijing?

Ajay Vaishnav / Zee Research Group

China’s rapidly rising military spending including the latest over 10 percent hike in defence budget has raised eyebrows in the Indian policy circles. Rather than being jittery, it’s time New Delhi learned from Beijing and other major military powers to embark on a sweeping modernization program.

While no one is suggesting India to enter into an arms race with China (an unsustainable proposition given the size of our economy), there does exist a case for efficient utilisation of defence outlays in the short-to-medium term and quality indigenisation of weapons manufacturing and development in the long-term. It is unfortunate in the extreme that India has miserably failed on both fronts.

The Indian defence budget is staggering -Finance Minister P Chidambaram has proposed a defence spending of Rs 2.03 trillion (USD 37.45 billion) for 2013-14, which is a 5.2 per cent increase over 2012-13. Last year’s budget stood at Rs 1.93 trillion. However, defence outlays have a history of under-utilisation thanks to the prolonged and complicated defence procurement procedures. Red tapism is the hallmark of the entire process. Funds earmarked under capital expenditure often remain under-utilised leading to their surrender at the end of the financial year.

Laxman K Behera, an expert with the New-Delhi based Institute for Defence Studies and Analyses, had reported that “of the total Capital Expenditure allocated for 2011-12, Rs 3,055 crore (4.41 per cent) has been surrendered at the time of revised estimate.” It’s further reported that “the unspent amount could have been much higher if the Navy had not been allowed to overspend its allotted capital budget by Rs 2801.25 crore.” The Air Force and the Army together have surrendered Rs 5,727.15 crore.

Clearly, despite promising efforts to fine-tune its procurement process, the Defence Ministry has failed to produce tangible results. What’s more perturbing, the surrendered portions of the Capital Expenditure relate to top priority areas of modernisation such as ‘aircraft and aero-engine’ for both the Air Force and the Army. It would be naive to ignore the trend as merely poor budget management skills and problems with the procurement system. Rather it reflects poorly on our security culture and establishment. It begs the question: are they really concerned about the country’s deteriorating security environment?

The problem of under-spending has further been exacerbated with decreased budgetary allocation and half-yearly cuts by the Finance Ministry. This year’s budgeted defence expenditure is just 1.79 per cent of the projected GDP for 2013-14 even though our forces and strategic experts are demanding 3 per cent of the gross domestic product to be spent on acquiring deterrence against China and Pakistan (Stockholm International Peace Research Institute, SIPRI). In December 2012, Finance Minister P Chidambaram had cut the defence capital outlay by Rs 10,000 crore. Isn’t it amazing that our finance ministers could do that even as China has been pursuing an unprecedented level of military modernisation with a double-digit annual increase in defence expenditure for two decades including the latest.

The first thing the Indian security establishment needs to do is to wake up from its deep slumber. To begin with, it must ensure that every penny of the taxpayers’ money is efficiently utilised to procure weapons and modernisation of the forces. It calls for introspection and brainstorming for solutions that expedite the procurement process without compromising on quality and transparency. For instance, take the delays in Gorshkov deal which has severely impeded the Indian Navy’s modernisation plans. Indianised as INS Vikramaditya, Russian Navy’s decommissioned aircraft carrier Gorshkov was originally scheduled for induction in 2008. Five years on, Gorshkov may finally be delivered in the last quarter of this year. Besides, the delays have resulted in massive cost escalations as well. From the originally contracted USD 947 million in the 2004 contract with India, Russia has raised the price three-fold to USD 2.3 billion.

A key component of the defence procurement reforms has to be to reduce over dependence on foreign arms supplies and indigenisation of weapons manufacturing. An ‘import substitution’ policy must be vigorously pursued to develop key military technologies through indigenous research. In this context, an impartial appraisal of the Defence Research and Development Organisation (DRDO) and other defence-related public sector undertakings is a must.

Collectively, they have failed to produce cutting-edge defence weapons and technologies thereby forcing the country to heavily depend on overseas sources. Major ambitious projects such as the Light Combat Aircraft, main battle tank Arjun, nuclear submarines et al are years behind schedule and nowhere ready for field deployment. Even more baffling is that many of these PSUs have become middlemen and importing systems on government’s behalf.

On top of it, government’s monopoly over defence industries and reluctance to involve the private sector hasn’t helped the matters. By opening the sector to private participation, the establishment will not only give huge impetus to research and development but also generate jobs for millions in a country marred by high unemployment numbers.

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