How much REALLY is India's defence budget?

by Ajai Shukla

(Business Standard: 11th March 08)

The defence allocation in the budget that Mr Chidambaram presented on 29th February officially went up 10%, from Rs 96,000 crores (US $24 billion) last year to Rs 1,05,600 crores (US$26.4 billion). But actual spending on defence had crossed the one lakh crore rupee(US$25 billion) Rubicon at least two years ago. 

There is no apparent reason for India to understate its defence budget. No IMF conditions constrain defence spending; military expenditure remains well below the politically correct level of 3%. But India continues to camouflage what other comparable liberal democracies transparently show as defence spending.

Is there an international benchmark for identifying defence expenditure? In fact there is: a United Nations General Assembly resolution (35/142B of 12th Dec 1980) standardised the reporting of military expenditure. This benchmark is accepted almost globally; 115 countries have reported since 1981.

Resolution 35/142B only legislated what transparent governments, defence economists and academics, and people with common sense already understood. Expenditure on strategic nuclear weapons, it says, constitutes defence expenditure; so does expenditure on paramilitary forces that are organised, armed and employed for guarding the borders and which could be used in combat against another country. All expenditure on military personnel, including pensions for retired soldiers, is to be reported as defence expenditure. The construction and repair of structures and facilities used for defence, says Resolution 35/142, is military spending. Command and communications systems for defending the country should be financed from the defence budget.

New Delhi, however, distributes a hefty chunk of this spending across heads other than defence. Within India’s nuclear arsenal, only the missiles that carry nukes to their targets are paid for from the defence budget. The bill for the nuclear warheads themselves is picked up by the Department of Atomic Energy. It is impossible to determine how much of the Rs 3908 crores (US$970 million) allocated (through Demand No 4) to the Department of Atomic Energy goes into nuclear power generation and how much goes into bombs. But even if one-third of the DAE’s budget goes into warhead production and research, Rs 1300 crores (US$325 million) must be added to the defence budget.

India’s plethora of paramilitary forces are allocated money from the Home Ministry budget (under Major Heads 2055 and 4055), even though forces like the Border Security Force (BSF), the Indo-Tibet Border Police (ITBP), the Sashastra Seema Bal (SSB) and the India Reserve Battalions (IRB) are deployed on the borders in defence of the realm. The Home Ministry also pays for the Assam Rifles (AR), even though it is commanded by army officers on deputation, and operates largely under the army. The same is true of the National Security Guard (NSG), the army-manned Black Cat commandos, charged with special missions like anti-hijack, hostage rescue, and anti-terrorist operations. The bill for these forces comes to Rs 7632 crores (US$1.9 billion). This does not include the Rs 4219 crores (US$1.05 billion) budget for the Central Reserve Police Force (CRPF), of which an estimated one-fourth is engaged in counter-militant operations in J&K, Assam, Tripura, Nagaland and Manipur. 

The Home Minister picks up the tab not just for these forces, but also a Rs 608 crore (US $152 million) bill for fencing the Pakistan and the Bangladesh borders this year. Shivraj Patil also pays Rs 555 crores (US$140 million) for housing the paramilitary forces while they perform military duties. And his colleague, Mr P Chidambaram, flouts UN Resolution 35/142B by making him pay another Rs 404 crores (US$101 million) for a high-tech surveillance and infrastructure network for the borders with Pakistan, China and Myanmar. Another Rs 100 crores (US$25 million) is allocated for “critical infrastructure within extremist affected areas”, which is used largely for security-related construction.

But the most glaring exclusions from India’s defence budget are the Rs 15,564 crores (US$3.9 billion) allocated for pensions (Demand No 20), and an allocation of Rs 2370 crores (US$592 million) for the Ministry of Defence (Demand No 19). The MoD allocation funds a regular army regiment called the J&K Light Infantry, the Coast Guard, and the MoD secretariat itself; it is impossible to argue that this is not defence expenditure. And even in countries as opaque as China, pensions to retired soldiers form a part of the military budget.

Factoring in these hidden expenses, India’s defence budget really amounts to Rs 1,34,133 crores (US$33.5 billion), rather than the Rs 1,05,600 crores (US$26.4 billion) that the government declares; that is a little over 2.5% of India’s GDP. 

While this article seeks to set the record straight, India remains a country where even experts, top government officials, and the legislature do nothing to debate defence expenditure and how to get more bang for the buck. Allocations that are a fraction of defence are discussed threadbare, but widespread ignorance of defence planning means that even an allocation of Rs 1,34,133 crores would probably have been passed by Parliament without a word of debate. In a land of holy cows, defence remains the most blessed of them.

HOW THE NUMBERS ADD UP

Declared defence budget         : Rs 1,05,600 cr      (US$ 26.4 billion)
Nuclear forces                        : Rs 1,300 cr          (US$ 325 million)

Paramilitary forces                 : Rs 7,632 cr           (US$ 1.9 billion)
Paramilitary housing              : Rs 555 cr              (US$140 million)
Border fencing                       : Rs 608 cr             (US$152 million)
Border infrastructure             : Rs 504 cr             (US$126 million)
Pensions                                : Rs 15,564 cr         (US$3.9 billion)
Ministry of Defence                : Rs 2370 cr            (US$592 million)
Actual defence budget            : Rs 1,34,133 cr      (US$ 33.5 billion)