In the Union Budget 2023–24, the estimated allocations for the Ministry of Defence (MoD) are Rs 5,93,537.64 crores, an increase of 13 per cent over BE 2022–23 (Rs 5,25,166.15 crores).
Amit Cowshish replies: The draft Defence Production and Export Promotion Policy (DPEPP) 2020 aims at achieving a turnover of Rs 1,75,000 crore (US$ 25 billion) by 2025, but no mechanism seems to be in place to aggregate the annual turnover–broadly defined as the value of sale–of the entire Indian defence industry, including the private sector entities.
This article examines India’s defence expenditure over the past ten years. In so doing, it provides a public finance perspective to explain the recurring resource crunch being faced by the Ministry of Defence (MoD). The article reasons that a substantial augmentation of resources for the MoD in the past has faced stiff barriers due to lack of tax buoyancy and also the political, economic and other exigencies that have led to greater public spending outside the traditional areas of expenses, including defence.
There is a need to formulate a composite policy that focuses on indigenisation in high priority technology areas, shedding the notion that it must necessarily result in savings. A more modest and focussed mission-mode approach to indigenisation can produce better results.
Given the limited resource base and various competing demands, the MoD needs to work on a plan to optimise its allocated resources, rather than hoping to bridge its entire resource gap through additional funding from the Ministry of Finance.
Self-reliance in defence may be better realised if India’s military instrument were to be shaped by political guidance and geopolitical considerations instead of being carried away by the contemporary winds of COVID-19.
Although the new measures announced to fast-track the defence sector are significant, they do not add up to a comprehensive and overarching reforms package.
The inevitable reprioritisation of the central government’s expenditure in the coming union budgets would affect the resource allocations particularly for big ministries like the MoD, which will be forced to realign their business practices.
Budgetary Reforms: The Forgotten Agenda
Micro and macro-level budgetary reforms are required to ensure optimum utilisation of the allocated resources for executing financially viable plans.