India’s defense budget will rise — but it will get eaten up by personnel costs | World Defense

India’s defense budget will rise — but it will get eaten up by personnel costs


Staff member
Nov 17, 2017
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India’s defense budget will rise — but it will get eaten up by personnel costs
By: Vivek Raghuvanshi

NEW DELHI ― Even as India’s new 2018-2019 defense budget rises, it seems rising manpower costs within the military will hinder some of the armed forces’ plans to acquire new weapons.

The country’s defense budget rose by 5.89 percent to $46.16 billion, against $43.59 billion in the previous year.

Of this, $30.61 billion is allocated for revenue expenditure meant for pay and allowances for the more than 1.4 billion active military personnel. The government has allocated $15.15 billion for the purchase of new weaponry as well as liabilities to which India previously committed.

In addition, $17 billion will go toward defense pensions meant for retired military personnel.

Vivek Rae, a former director general for defense procurement within the Ministry of Defence, said that “budgetary constraints” are making it impossible to increase the pace of defense modernization efforts. “Business will continue as usual, until we land in a crisis,” he noted.
“The allocation for defense is undoubtedly quite low, but there is no danger of the MoD defaulting on obligatory expenses on salaries, ration and clothing, or on honoring the contractual liabilities,” according to Amit Cowshish, the MoD’s former financial adviser for defense acquisition.

“Modernization will continue at the slow pace as in the past, resulting in new contracts worth about $10 billion being signed next year, which is the average value of the contracts signed every year during the last four years,” he added.

Under the new budget, the Army will receive about $20 million for pay and allowances and well as the maintenance of land warfare systems and ammunition stocks. Only $4.19 billion is allocated for the purchase of new military hardware.

The Air Force will receive $5.58 billion to purchase new fighters and helicopter, while $4.5 billion will go toward maintenance and operational preparedness of its aircraft.

The Navy will receive $3.25 billion to purchase new warships and other naval gear. About $3 billion has been allocated for maintenance of the existing fleet.

India’s state-owned defense research and development agency, the Defence Research and Development Organization will receive $1.52 billion to kick-start new defense R&D programs; $1.26 will go toward existing programs.

India’s state-owned ordnance factories have been allotted $125.62 million for new ordnance programs, including ammunition. Existing products for the defense of the air, land and sea will be allotted $113.59 million.

The budget also provides money for the Indian Coast Guard, the MoD and other miscellaneous expenditures.

“No ruling government in India can give quick-fix solution to meet pressing armament procurement demands, which as of today would cost around $75-100 billion, because country faces two front conventional and nuclear threats ― both from China and Pakistan,” a senior MoD official asserted. “Therefore, military manpower cannot be curtailed, which leaves little money for buy[ing] new weapons.”

The official declined to comment on how defense programs such as single-engine fighters, new-generation conventional submarines and multiple types of helicopters will take off under Make in India’s strategic partner policy.

Notably, only $22 million has been embarked for mega Make in India initiative which is planned to kick-start army’s $4 billion tactical communication system, $6.25 battlefield management system and over $9 billion futuristic infantry combat vehicle programs.

“The new [defense] budget has no room for new programs,” said the CEO of a private defense company, who spoke on condition of anonymity. “Make in India push is virtually a non-starter, which will eventually force [private] sector to exit the defense market.”

India is among the top-five armament buyers in the world.


Dec 18, 2017
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How much is actually spent on arm deals last year?

Total budget was around 53 billion dollars, about 13 billion was capex (acquisition). Total amount (projected) this year increased around 6-7%, and capex allotment looks to be around 15 - 16 billion this year. The totals in the OP article dont include some spendings like pensions I believe...i.e definitions vary so I use broadest one.

The good news I have heard is that last fiscal year was the first year in a long time the budgeted amount was actually used close to 100% level (it has been really bad in capex in recent years before, as low as 60% some years prior). I expect this new trend (good utilisation/deployment) to continue.

As for announced arms deals/acquisitions, they would be like greenfield investment announcement for FDI compared to deployed yearly FDI...variable commitment and timespan so the number is not really important tbh (unless you are comparing to solely itself over the years, which I am not sure of other than it has increased over time commensurate with the defence budget).

There will be tight years for a while now (in reference to this article), but I am fine with that given India wisely is a) focusing more attention to pressing economic needs b) adding pressure to get better use of the defence funds alloted, which could lead to more bureaucratic streamlining and further push for indigenisation.

Its best to have scarcity and prioritisation now rather than later, because the defence bureaucrats are quite cancerous in many depts. It can be a good treatment to have some survival of the fittest/economising there....than giving the same buffers and overheads they are used to...esp in tight fiscal situation.