Hike for Defence but Upgrade may Need More

Context: India needs to innovate new money-spinners for the defence sector through projects like defence tax, indigenisation and Atmanirbharta.

Need for Innovative Financing Measures for Defence Sector of India (financial challenges in the defence):

• A huge share of defence pension and capital budget: both of which individually are approximately half of the total defence revenue budget.
• Insufficient rise in defence spending: (up to 2%) might not effectively provide enough funds for defence modernisation.
• Defence spending is bound to decrease: as a percentile of total spending due to huge spending in health, infrastructure and import of oil and gas.
• Travails of lapsed budget allocations: Trials and negotiations go asunder if a service is unable to spend the allot- ted funds within the financial year.
• Limitation of Atmanirbharta in defence: would be time-consuming and could limit state-of-the-art military capabilities and high-tech acquisitions of services such as artillery guns, rockets, aircraft etc.

Analysing the Budgetary Proposals/Measures for Defence Sector:

• Overall increase in the defence budget (by 1.4%) and capital outlay (by 19%) besides an additional Rs 20,776 crore. (a deceptive indicator effectively not providing enough funds)
• Allocation for pensions: is expected to decline owing to an expected increase in the retirement age.
• Starting Sainik schools with Non-Government Organisation (NGO) help: it was not too successful with the existing 22 Sainik Schools.
• Non-lapsable defence clause: (as recommended by the Finance Commission) along with expected change in a fiscal year would ensure better purse string for defence forces.

Way Forward: Indian defence sector can be financed through following innovative measure-

• Introduce defence tax: attempted after the 1962 debacle at the hands of China.
• Share the burden with the public and private sector: charge refineries and other huge establishments, especially along with border areas, a certain reasonable share in new acquisitions.
• Curtail defence pensions: by trimming flab and getting rid of non-productive assets in the civilian defence-industrial complex.

Conclusion: India needs to ensure no overspend on revenue and pension heads and must strive for 3% of the GDP in defence allocations.