India’s ready to spend on defence — just not on modernisation

Outlook for India's defence expenditure in 2020BCCL

  • India defence expenditure is unlikely to change in the coming year.
  • Most will go towards salaries and pensions, while the rest will go towards the military, army and naval services.
  • Most of 2020’s defence expenditure will go towards acquiring new Tejas Mk 1A aircraft.
India’s is modest when it comes to spending on defence. This year’s budget allocation of ₹4.3 lakh crore — 1.6% of the GDP — was the lowest since the 1962 war against China. And, that doesn’t seem to be changing anytime soon.

"Allocation to remain static, selection is key," said ICICI Securities report on expectations for 2020.

Nearly 71% of the budget went towards defence services and 26% towards pensions — leaving only 3% for the Ministry of Defence’s civil operations. Even in that, more than half goes towards salaries and pensions.
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While some may argue that India’s reserved defence spending leaves more money for development, it also leaves little room for modernisation.

More weapons, more power

Out of the total allocation of the defence budget, nearly one-third went towards acquiring new weapons.

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"The headline capital expenditure growth of 10% is the highest since FY13 and not due to some restructuring of heads as was the case in FY17, but genuine addition of allocation across Army, Navy and Air Force," said the report.

While this meant that some quick money was spent, not a lot was done in terms of modernisation.

Most of next year’s budget to be eaten up by Tejas Mk 1As

The outlook for the coming year points to not much change in the future. Most of next year’s budget will go towards acquiring the Tejas Mk 1A — India’s homegrown fighter jet.
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"There is no decision of Tejas Mk 1A orders yet, an acquisition which we expect will complete in CY20. This can consume a significant chunk of the CY20 budget allocation," said the ICICI Securities report.

The Tejas Mk 1A spent four decades in the making to match the capabilities of the MiG-21 aircraft — and yet, it falls short in comparison to other leading fighter jets around the world.

The manufacturer, Hindustan Aeronautics Limited (HAL) — which was responsible for making the Tejas Mk I aircraft — has only been able to deliver 8 aircraft a year. In comparison, bigger manufacturers are able to deliver 16 to 17 in a year.
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Moreover, India has plans to order 83 Tejas Mk1A jets in the coming year.

"We also expect steady allocation towards naval platforms and perhaps CY20 capital allocation will reflect the same," said the report.

No room for modernisation

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The Indian Army is currently struggling to upgrade its equipment because of the resource crunch. In addition to being cautious about bringing new projects on board, it’s also grappling to pay for past contracts.

Against a requirement of ₹1.1 lakh crore for committed liabilities, the budget allocation fell short by ₹67,363 crore — nearly half the requirement, according to the Institute for Defence Studies and Analyses ( IDSA).

Acquiring new equipment is only one of the problems — the other is being sustainable.

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Investment towards research and development has been increasing 8% annually, according to ICICI Securities. But it still remains a very small proportion of the total defence budget. In 2019, only ₹19,021 crores — 4.4% of the budget — was allocated to the Defence Research Development Organisation (DRDO).

See also:
India’s defence budget has nearly doubled in 5 years but the money is not enough to upgrade the weapons

ISRO's all-weather ‘spy satellite’ will help India watch its borders closely
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