The Indian Finance Ministry appears to have been under pressure to apply brakes on expenditure. A cut in the defence budget of Rs. 10,000 crore which amounts to five per cent, is substantial.

At $711 billion ( Rs. 39,10,500 crore), the United States of America continues to be the major defence spender. As some statistician put it, it spends more than the next 20 spenders put together. The US military spending accounts for 41 per cent or over two-fifth of the world’s total military spending, is almost five times that of China, ten times that of Russia, 15 times that of India and 95 times that of Iran.

The US defence cuts were debated at great length during the run-up to the presidential elections. Defence expenditure supported on a ‘pillar of debt’, questionable threat assessment, ambitious global overreach programme driven by politico-industrial-military complex at the cost of other social spending, had to finally face some expected cuts. Todd Harrison, a defence analyst at the Centre for Strategic and Budgetary Assessments think tank, predicted that the across-the-board spending cuts had already been over delayed. The Pentagon faces $500 billion ( Rs. 27,50,000 crore) in across-the-board cuts to projected spending over the next decade. At around $50 billion ( Rs. 2,75,000 crore) annually which is more than the Indian annual defence outlay, the cuts will be close to eight per cent. For the industry and consequently the work force, it is going to be a rather harsh winter. Economist Intelligence Unit recently prepared the world ‘state of peace’ map (see map).

In the Indian context, the nation is sitting at the epicentre of the world which is perpetually at war, fuelled by serious boundary disputes and terrorism. Ballooning fiscal deficit (5.8 per cent), less than expected increase in tax collection, rising inflation, delayed disinvestments, falling GDP growth and a season of major elections, the Indian Finance Ministry appears to have been under pressure to apply brakes on expenditure. A cut in the defence budget of Rs. 10,000 crore, which amounts to five per cent, is substantial. While announcing the budget for defence which was approximately $46 billion ( Rs. 2,53,000 crore), the Finance Minister had mentioned that the “allocation was based on existing needs and any further requirement would be met”. However, with this cut, the military’s wish lists and timelines to bridge the gap with the Dragon, have gone into a downward spiral. The cut is not affordable as it will adversely affect vital acquisition plans of aircraft, ships, helicopters, howitzers and missiles. For the Indian Air Force (IAF), the primary concern would be further slippage in the finalisation of the already muchdelayed $20 billion ( Rs. 1,10,000 crore) plus contract for 126 French Rafale fighter jets. It will also put paid to the now aggressive Defence Minister A.K. Antony’s campaign for an additional outlay of $8.5 billion ( Rs. 46,750 crore) for 2013. He was pressing these in the backdrop of a worrying China- Pakistan collusion and a possible multi-front threat. Of the total capital expenditure of the three services, around 89 per cent (nearly $14 billion or Rs. 77,000) is earmarked for capital acquisition or modernisation. Unfortunately, of the total capital acquisition budget, more than 90 per cent is accounted for by the ‘committed liabilities’, leaving aside little over a billion for the ‘new schemes’.

Air Forces today are the sharp end of a country’s war fighting potential—quick and reactive. In the case of India, the IAF also provides a vital component of India’s nuclear deterrence. This year, the IAF received 25 per cent of the total defence outlay. Chief of the Air Staff Air Chief Marshal N.A.K. Browne, who has been personally spearheading the IAF modernisation drive, rightly said recently that the IAF is progressing on this effort on multiple fronts and this has been possible “due to generous sanctioning of the budget by the government and its full utilisation”. Any curtailment of the budget at this stage will adversely affect the modernisation efforts of the IAF. Who wants Jack and Jill to come tumbling down? For air forces, there is little difference between war and peace. Flying activities have to sustain in order to train and prepare pilots for war. Winters also means greater air effort to support the troops deployed in inhospitable terrain. Winter is also the season for major exercises. Any cut in the defence budget that will affect fuel allocation would have serious implications.

The Army too had sought a significant hike in budget allocation for the Twelfth Five Year Plan (2012-17) for upgrading its rapid reaction ground force capability against China by building two specialised divisions in high-altitude areas at a cost estimated at more than $11 billion ( Rs. 60,500 crore). The clarion call by the former Chief of Army Staff General V.K. Singh had shaken up the establishment, necessitating a closer look at the requirement to modernise the Army. Modernisation was on. This plan too, will now have to wait.

Burgeoning economy means China’s $143 billion ( Rs. 7,86,500 crore) defence budget which is 8.2 per cent of world defence expenditure, is just two per cent of its GDP vis-à-vis India’s $46 billion ( Rs. 2,53,000 crore) being 2.5 per cent of GDP. Many however, contest these figures as there is lack of transparency in China. With India’s GDP dropping to 5.5 per cent from the dream figure of 10 per cent that India was about to hit, the shoe size is going to reduce and it is going to pinch. China is embarked on replacing the relatively old inventories with modern strategic missiles, space-based assets, aircraft carriers, fighter jets, warships and more. They are pushing aggressively into areas encircling India by building all-weather roads, rail tracks, airfields and silos.

Relatively successful indigenisation programme of the Chinese is gradually making them less dependent on the western defence manufacturers. China allocates substantial resources to military research and development, presumed to be in the region of $25 billion ( Rs. 1,37,500 crore) per annum. India has yet to get its act together on this count, and therefore, the world is eyeing the lucrative Indian market. Any budget cuts here will also impact global manufacturers and some of the floundering economies heavily dependent on defence exports.