What We Expect In Defence Budget 2022-23?

Defence Budget of a country is the resource dedicated by the State to raise, maintain and train her Armed Force. This allocation depends on Military Threat or aggression it conjures. The allocation is expected to cover Employees Salary, Training costs, Maintenance of Equipment and Infrastructure, Support of Ongoing and New Operations and Development of Technology, Weapon System, Equipment and Vehicles.

For 2021-22, Defence Budget Allocation was Rs 3,62,345 point 62 crores or $49.6 billion. In addition, an allotment of Rs 4.78 lac crores was made for Pension to be paid to retired soldiers. The budget for Defence Research and Development Organisation was Rs 11,375 crores and that for Border Road Organisation was Rs 6004 point 1 crore. As per observations of 15th Finance Commission, allocation for Defence Budget between 2011- 2021 ranged from 15.5 to 17.8 percent of Government Expenditure. For 2021-22, it was 13.7 percent of GE.

What We Expect In Defence Budget 2022-23?

Indian Defence Forces are busy converting from Traditional Warfare to Two Front War with China and Pakistan. They are also engaged in achieving Strategic Autonomy to become Regional Power. Presently, the nature of conflict is changing to Hybrid War wherein India will have to simultaneously engage in Traditional as well as face Cyber, Proxy, Space and CNBC War. Then, India is nurturing her Global Aspirations to become a Super Power, Economically as well Militarily. While doing so, her endeavor is to Reduce Imports of Weapons, Ammunition, Infrastructure and Equipment.

The malady faced by Indian Defence is Prolonged Delay in Acquisition/Import of Foreign Weapons, Ammunition, Infrastructure and Equipment. Main reason for this delay is lack of alignment in Defence Budget Allotment and Acquisition Plan of Weapons, Ammunition, Infrastructure and Equipment. There is usual, inordinate delay of above 18 months in every case after import is cleared by Defence Acquisition Counsel/Committee and actual acquisitions as seen in recent Rafael Fifth Generation Multi Role Aircrafts. Contracted in 2016, final delivery will be effective in 2022. To obviate such delays, there is need to a) Form up an Acquisition Funnel, b) Allot Funds to a particular Acquisition Scheme in same year when it is to mature for Delivery and c) Allot Funds based on Present Critical Operational Voids.

Challenges before Indian Defence Forces are; a) Steep rise in Manpower cost, in that; constantly increasing Training costs, Salary, Allowances, Pension, Clothing, Ration, Equipment and Infrastructures; b) Budget Deficit, in that; Faulty Projection of Demands, Vast difference between Demand and Actual Allotments, only meager 1 point 2 to 1 point 98 percent of GDP allotted to Defence per year in comparison to 4 percent in Pakistan and 6 percent in China; c) Lack of Indigenous Defence Manufacturing Facilities in India in spite of various Tax sops/incentives by the Government; d) Lack of National Security Strategy, in that; even after 70 year of Independence, there is no clear cut National Security Policy. Therefore, there is no National Aim. These change as per change in outlook of Political Party at the helm. So, Defence Forces are caught in dilemma of Preparedness versus Acquisition; e) Civil Military Coordination and Relations, in that; Generals and Babus are always at logger head on most of the issues. What Forces want is never fully comprehended, understood by the Babus who invariably wave Financial Crunch Flag for almost every demand put in by the Forces. To obviate that, post of Chief of Defence Staff and Department of Military Affairs was created in 2021. General Bipin Rawat was first CDS heading DMA. It seemed that things were moving smoothly though there was no substantial change in Defence Allotment in 2021-22. His sudden, unfortunate demise in a helicopter crash in December, 2021 has created a void and Forces are apprehensive that things may not work to their liking/advantage this year and f) Substantial Funding is required for purchase/acquisition of War Ships, Missiles, Drones, Fighter Aircrafts, Surveillance Equipment, Rifles, Tanks and Artillery Pieces. Funds are also bane of Start Up Industries and Micro Small and Medium Enterprises. This has to be ensured by the powers that be.

Pressing needs of Defence Forces can be sub divided as a) Core Defence to include Size, Structure and capabilities of Armed Forces for operation in Multiple Domains; b) Committed Liabilities of Acquisition in Capital Budget; c) Committed Liabilities of Pay, Allowances and Pension in Revenue Budget and d) Infrastructure like Ex servicemen Contributory Health Scheme, CSD (I) Canteens, Scholarship Scheme for wards of soldiers and Women Empowerment Schemes like AWWA/AFWWA/NWWA for benefits of serving/retired soldiers.

From our analysis of threat perception and short comings of system emerges percentage requirement of allotment of Defence Budget amount. It is recommended that budgetary allotment for Army be 24%, Navy 19%, Air Force 17%, Space and Maritime Domain Awareness 11%, Cyber Warfare 11%, Research and Development 10% and Strategic Capability and Nuclear, Biological, Chemical and Radiological Warfare 8% of total allotment to Defence Forces. To effectively utilize the allotted amount, Ministry of Defence must develop a Long Term Ten Year Capability Development Plan and Sort Term Five Years Capability Acquisition Plan.

Capital Budget requirement for 2022-23 for Army is 7.2 billion US Dollars, Navy 6 Billion US Dollars and Air Force 7 Billion US Dollars. These figures and figures given above differ since those are percentage allotment of Total Budgetary Allotment and these are for buying of new or/and payment of previously contracted, both Domestic as well Foreign Acquisitions. These purchases/acquisitions are essential to a) Enable Defence Forces to function/work as Net Security Provider for our Land and Sea Borders and in Indian Ocean Region; b) To facilitate Restructuring Capabilities from Traditional to Theater Command Concept and c) To achieve Surveillance and Domain Awareness in respect of China and Indian Ocean Region. To utilize Capital Allotment effectively and not to let it lapse for whatsoever reason, there is a need to create “Non Lapsable Modernization Fund for Defence and Security”. Some work has been done on this aspect in last budget, but it needs to be expedited and put to effect in this financial year. It must also be ensured that allotment made for Research and Development purpose is fully and truthfully utilized

Ms Nirmla Sitaraman will reveal what will be the allotment for Defence Budget 2022-23 on Tuesday,01 February,2022. Much would depend on what are the fiscal resources available to her and keeping in view, forth coming elections to various State Assemblies, whether Government gives priority only to welfare schemes or strikes a delicate balance. But Defence Analysts and Defence Sector expect that; a) Separate Specific Capital Budget Allocation be made for modernization of Indian Aerospace and Defence (AD); b) Tax incentives be given to create more lucrative and conducive environment for AD players in India; c) Capital Budget Allocation be minimum 20% more than that of 2021-22 pegged at Rs 13,506 crores; d) Capital Allocation for Domestic Procurement be increased minimum by 15% than Rs 80,000 crores made for 2021-22; e) Lucrative Tax Deduction Incentive be given for investment in Research and Development by Private Entrepreneurs and f) Import of Strategic and Critical Components by Private Defence Manufacturers be exempted from GST and Custom Duty.

This is Wishful Thinking by us Defence Analysts, for Annual Budget 2022-23. The cat will be out of the bag on 01 February 2022. Till then, let’s wait and watch patiently.