Budgeting for security needs

Defence spending has increased marginally in real terms, but the need is for sustained investment in defence equipment to offset the declines in force levels and maintain a credible defence capability.

JASJIT SINGH

THE increase in India's defence spending this year, reflected in the allocations in the Union Budget for 1998-99, has drawn criticism from China, perhaps for the first time. This is somewhat surprising since China has been increasing its own defence spending in a big way. China's official figures in respect of defence spending cover only about a quarter of its actual spending. But even its official defence spending this year increased by nearly 13 per cent over last year; this came on top of a 15 per cent increase in spending over the previous year. Considering that inflation runs low in China and that the country is cutting back nearly a sixth of its armed forces and replacing another one-sixth with younger, lower-cost manpower, these increases are significant in real terms.

Many people in the West have projected the rise in India's defence spending this year as a "hefty" increase and have linked it to the recent nuclear tests and an imagined "arms race" in the subcontinent. But in actual terms, this year's defence budget provides for an increase of a little over 14 per cent over last year's expenditure. Over 4 per cent of that will go towards meeting the additional expenditure on pay and allowances following the implementation of the Fifth Pay Commission report. Inflation will absorb 7 per cent. This translates into a very small increase in real terms; it appears that even this is being eroded by the drop in the rupee's value.

The reality is that India's defence spending this year will be only about 2.4 per cent of the gross domestic product (GDP), down from 3.6 per cent of GDP 10 years ago. This means that the decline in allocations for defence over the years has contributed to a notional reduction of 1.4 percentage points of the fiscal deficit during these years. If the deficit did not actually come down, it is because expenditure under other heads has not been reduced; in fact, it has risen.

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Su-30 fighter aircraft of the Indian Air Force.

Under the circumstances - considering that the economy needs to be given a boost and that the country has to face the possibility that sanctions could deepen and widen - the fact that defence spending was increased only marginally is understandable. It is, however, a positive sign that for the second year running, the level of defence spending has not declined. In 1996-97, defence spending dropped to 2.3 per cent of GDP - the lowest level since the 1962 war with China. In fact, this writer had in the early 1990s argued in favour of arresting the decline in defence spending and had said that if it continued to decline at the same rate, it would make the nuclear option a greater necessity.

DEFENCE spending is normally viewed in annual terms since the allocations are made on a yearly basis. But it helps to have a longer-term perspective and situate the annual budget in that framework. The security environment in the region has been nuclearised since at least the early 1960s; Pakistan has had nuclear weapons capability since 1987. The question that defence planners must ask themselves is: what implication does the nuclear factor have on conventional wars - and, therefore, on the force structure that is needed for the future? The answer is fairly clear: the need is to prepare for a limited war.

It is true that all the wars that India was dragged into were limited wars, but they were limited in time, space and scope because India chose to make them so. India opted to end the wars in 1948, 1965 and 1971, each time at a stage when it was winning, but the issues remained unresolved. In 1962, India did not press a war after China unilaterally withdrew its troops from the northeastern region. The nuclear factor has not taken that choice away and the next war, if it ever takes place, will be a limited war - out of compulsion.

A strategic defence review - of the kind promised by the present Government - therefore becomes important. There will, of course, be many turf battles to be fought, as happens in all countries and in complex organisations like the defence forces. Already, arguments have begun to emerge about the nature of command and control over strategic capabilities, although it is obvious that the Indian Air Force is the logical repository of combat airpower and the air force is the organisation that has traditionally employed it most effectively in all countries except those that can afford multiple air forces. In fact, even the United States reorganised its airpower after the Gulf war by recognising the strategic role of conventional airpower, which was considered limited to nuclear capabilities until then.

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At a firepower demonstration at Pokhran on March 21, 1998.

It is possible to argue that defence planning may have already taken this into account. Even so, it must be recognised that manpower costs have risen at an average of 10 percentage points a year for the past two decades or so. The cost of weapon systems too has increased significantly during this period. This has given rise to concerns about how best to ensure a credible but affordable defence. It is against this background that annual defence spending figures should be viewed, especially the component that directs modernisation and re-equipment.

Allocations for capital expenditure show an increase of 11.4 per cent. Within this, the Navy gains at the cost of the Air Force. The increase of over 31 per cent in capital expenditure is to be welcomed since naval acquisitions and warship construction had been starved of funds for many years. Independent studies (see Asian Strategic Review, 1995-96) indicated that at the current rate of investment of resources, the Indian Navy would be dangerously deficient in warships and submarines by the end of the next decade. Indigenous warship construction, which had averaged around 24 ships every five years during the 1980s, dropped to an average of 14 during 1995-2000. India is left with little option but to buy warships from abroad to compensate at least partially for the rapidly declining force level. The construction and commissioning of INS Delhi has confirmed - if such confirmation was needed - that India can design and construct some of the finest, state-of-the-art warships at far lower costs than those that prevail abroad. The long-overdue increase in investment in dockyards and the naval fleet is to be welcomed.

However, sustained investments are needed to avoid fluctuations in re-equipment and force levels. The ongoing efforts to reverse the trend of decline in warship strength would still leave the force level in 2005 lower than the level in 1990. And some of the gaps have to be filled by acquiring second-hand warships, with shorter life in service. What this implies is that unless India gets out of the cyclical rise and fall in weapons acquisition, it will run into difficulties on the fiscal front as well as in the creation of credible defence capabilities. This applies to all the three Services, but particularly to the technology-intensive Air Force.

It is, therefore, curious that the capital outlay for the Air Force has declined by 5.52 per cent from last year. What is far more worrisome is that capital expenditure for the purchase of aircraft (and aero-engines) declined from Rs.3,426.29 crores last year to Rs.2,708.18 crores, down 21 per cent. This poses hurdles in the creation of a credible capability for the Air Force, both for conventional warfare and for a nuclear posture. To some extent, this may be the effect of the payments for the acquisition of Sukhoi-30 aircraft last year, but this only highlights the fluctuating nature of budgetary allocations.

The seriousness of this situation is accentuated by the fact that the Air Force will be the lynchpin of nuclear weapons delivery systems, which have to rely heavily on manned aircraft. The IAF requires about 350 new fighter aircraft over the next 10 years to replace the ageing fleets of MiG-21s and Jaguars, besides a significant number of helicopters and transport aircraft.

The Light Combat Aircraft (LCA) was earlier expected to be inducted into service by the end of the century, but it now seems unlikely to enter service in any meaningful numbers before A.D. 2010. There has been extremely limited modernisation during the past 10 years.

The budget allocations seem to indicate that no acquisition of aircraft is scheduled for this year. This will bunch up requirements again in the near future. But more dangerous is the risk that given the limitations of resources, the numbers will not be enough and that the force levels will drop. The gaps are likely to widen in the coming years and the size of the Air Force is likely to shrink. This may take the cutting edge off the Air Force's conventional as well as strategic deterrence capability.

India's actions appear to go against global as well as Asian trends: the primary focus of modernisation, especially in cash-strapped countries, is on air power and to some extent on naval forces.

Compare this with the furious military modernisation going on in China, which will have a spin-off effect on Pakistan's conventional forces. Sixty-three per cent of Pakistan's combat aircraft inventory is from China. In the next 10 years, China is likely to possess over 350 Su-27/30MK aircraft (India will have 40 Su-30MKs), a dozen Il-96/76 for AWACS (Airborne Warning and Control Systems) aircraft, and so on. Over 3,000 Russian technicians are working in Chinese defence industries to upgrade Chinese technology and to design new equipment. But India, despite its three-decade-old relationship with Soviet Union/Russia, did not have the strategic sense to establish links with the Russian design base during the past seven years. It is still not too late. One way to keep costs down, enhance the level of self-reliance and maintain a credible defence is to look for joint ventures with Russia before it gets too late.

THE increase in the budget allocation for defence research and development is another positive step, although it may not represent what many commentators have assumed - that it is linked to the nuclear weaponisation programme and to the building of an arsenal. Defence research and development (R&D) gets 6.01 per cent of the defence budget this year, against 5.53 per cent last year, but the level of investment is still far too low to contribute to self-reliance in any meaningful way. In 1995, the Parliamentary Standing Committee had recommended that budget allocations for defence R&D be raised progressively so as to reach the level of 10 per cent of defence allocations from 1998 onwards. Dr. G. Balachandran has estimated that the 10-year Self-Reliance Initiative launched by the Government in 1995 with the aim of increasing the indigenous component in defence equipment from 30 per cent to 70 per cent has failed thus far. In fact, the indigenous component has gone down since 1995, and there is little hope of the target being met by 2005: clearly, either the ability to indigenise was overestimated or the challenges were underestimated. There appears to be a certain flaw in the approach, because the initiative would still have addressed only the indigenisation of spare support. Hindustan Aeronautics Limited (HAL), the public sector aircraft manufacturing conglomerate, has had substantial idle capacity since 1996.

There is still time to link up with the Russian aircraft industry to institute joint ventures. The MiG-AT advanced jet trainer appears to be a prime candidate for such a cost-effective approach. Some former IAF officers have argued that India must not acquire aircraft unless they are fully developed and tried. But India's experience of acquiring the redoubtable Gnat, the MiG-29 and even the Mirage-2000 proved otherwise. Similarly, there is a need for planning to overcome the likely drop in combat force level during the next 10-15 years, just when airpower in the neighbourhood reaches a technological and quantitative peak. There is talk of "force multipliers". They do play a key role in modern warfare, but force multipliers are no substitute for force. It may still not be too late to reopen the MiG-21 manufacturing line and keep it going until an affordable and capable aircraft is available at a future date. It should be noted that the MiG-21 version will be the mainstay of China's Air Force for the next 20 years, and is likely to be the workhorse for Pakistan too.

Following the nuclear tests at Pokhran in May, all eyes were on the defence budget, and the general assumption was that the tests would lead to immediate and massive nuclearisation at unbearable costs. Commentators said that the cost of maintaining the nuclear deterrent would be of the order of Rs.4,000 crores a year. This appears to be an overestimate. In the near term, it would be realistic to expect an incremental growth. The allocations for defence R&D this year provide no clue about the nuclear deterrent: the capital expenditure for R&D is only Rs.2 crores more than what it was last year. Since there are indications that an Agni-class Intermediate-Range Ballistic Missile was built last year, it would appear that no such plan exists this year also, unless provision is made for drawing from the revenue expenditure head. Such a decision may be contingent on the strategic defence review to be undertaken by the proposed National Security Council. The review itself may take a while, but work on missile development should not be affected by that process.

Air Commodore Jasjit Singh is Director, Institute for Defence Studies and Analyses, New Delhi.

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