India's defence cost: High on personnel and low on modernisation

SIPRI is incorrect; India is world’s 5^th largest defence spender, not 3^rd largest, Russia and Saudi Arabia spent more last year

By Ajai Shukla

Business Standard, 1st May 2020

A well-respected Swedish think tank, which announced on Monday that India was now the world’s third-biggest military spender, appears to have overestimated Indian defence spend.

In making this determination, the Stockholm International Peace Research Institute (SIPRI) has put India’s defence spend for 2019 at $71.1 billion, behind top spender USA ($732 billion) and China ($261 billion), but ahead of Russia ($65.1 billion) and Saudi Arabia ($61.9 billion).

However, the most recent Indian budgetary figures (revised estimates) put Indian defence spending for 2019-20 at Rs 448,820 crore, or about $59.4 billion. That actually puts India at fifth place, behind both Russia and Saudi Arabia.

It is unclear how SIPRI has arrived at a figure of $71.1 billion. The lower Indian budgetary figures include all aspects of defence spending, including salaries and defence pensions, the civilian establishment of the ministry of defence (MoD), the Coast Guard and the Border Roads Organisation.

SIPRI is also incorrect in stating that India spends 2.7 per cent of its Gross Domestic Product (GDP) on defence. The most recent figure for the year 2019-20 was 2.18 per cent of GDP.

However, interesting findings are thrown up by a Business Standard analysis that compares Indian defence spending (2020-21 budget figures) with five other countries – the US, China, Russia, UK and Pakistan. 

India allocates by far the highest percentage of its defence budget on personnel costs, with a hefty 59 per cent going on salaries and pensions. Even the US and the UK, which pay their soldiers relatively lavishly, spend only 38 per cent and 30.6 per cent on personnel costs.

Unsurprisingly, the heavy outgo on personnel costs results in India having the lowest percentage spend on equipment modernisation, i.e. capital expenditure. While China and the UK spend 41 and 42 per cent of their defence budgets on modernization, and even Pakistan spends a healthy 37 per cent, India can spare no more than 25 per cent of its defence budget on capital expenditure.

Countries like the UK plan equipment modernization for a ten-year window, identifying exactly what weapons platforms they need to replace and allocating the funding for procuring replacements. 

In contrast, India’s 15-year Long Term Integrated Perspective Plan (LTIPP) is an endless wish list that the Budget cannot hope to support, since there are no priorities identified, nor any alignment of requirements with future budgetary means.

India is ahead only of Pakistan in the amount of money spent on each soldier each year, including salary, equipment and training costs. While the US spends over half a million dollars per soldier and the UK spends $367,000, India spends a mere $43,000 per individual. As a consequence, the Indian military is a manpower-heavy throng that is poorly armed, equipped and trained.

While China shows up well behind the US on almost every count, many defence analysts argue that China’s expenditure figures are misleading. These figures use conventional currency conversion, without adjusting for purchasing power parity (PPP), even though China builds most of its equipment indigenously rather than buying them at dollar prices from the international arms bazaar.

Calculating from a PPP perspective, scholars such as Peter Robertson, professor at the University of Western Australia, put China’s real military spending, as an equivalent of US spending, at $455 billion – not far behind the actual US spending of $732 billion.