Defence Budget provision for 2012-13 is Rs 1,93,407 crore, up 13.1% from 2011-12, of which 41% is capital and 31% salaries. Defence expenditure has steadily grown from Rs 85,495 crore in 2006-07.
War and diplomacy are two sides of a coin. Diplomatic efforts to address legacy issues are glacial processes requiring great perseverance for durable results. While geopolitical equations in the world are changing, we have to watch for a desperate adversary like Pakistan and an increasingly assertive China.
China enjoys a definite advantage. Its 2012 military budget is $106.4 bn, the second-largest after the US, against India’s $38.5 bn. The actual ratio of 1:2.75 may be 1:3 between Indian and Chinese defence budgets. At 2.1% of GDP, Chinese defence budget in absolute terms is bigger than our defence budget because Chinese GDP is almost four times India’s.
Chinese forex reserves are 10 times more than ours. Its general government debt is 35% of GDP compared to our 65%. Its military size is almost double of ours. China’s bigger military budget is backed by its stronger economic might. In 2012, China aims to grow its economy by 7.5% with inflation target at 4%. The fiscal deficit is targeted at 1.5% of GDP, up from the 1.1% in 2011. In our Budget, growth target is 7.6% and implicit inflation assumption of 6.5%. If the optimism misfires, our numbers could be regrettably worse. Economic growth would suffer without fiscal consolidation and reduce resources for defence.
We must prioritise defence acquisitions to fast track what we critically need to sharpen the fighting edge rather than buying what is readily available so as to spend the budget. The aim of defence spending should be a lean and mean war machinery.