The State of Economic Decision Making Within India's Armed Forces is Deteriorating

An analysis of the country's defence budget allocations not only suggests a lack of integrated planning, but worse, a deterioration in coordination.

India’s security concerns mandate a strong army, navy and air force where the three wings work cohesively for maximum tactical and operational efficiency. The three wings of India’s armed forces began operating in synergy, owing to the willingness of the respective chiefs, since the war of 1971. The then capability to engage in hybrid warfare gave India the edge that led to victory. However it was only after the Kargil war that the immediate need for an integrated defence staff, chief of defence staff and for a long-term integrated perspective plan (LTIPP) was felt. The establishment of all three was recommended by the Arun Singh Committee in 2000. Despite this, it took twelve years for the first LTIPP (2012-2027) to be drafted.

In this LTIPP, the armed forces have laid out a 15-year plan for modernisation, strategic engagement and procurement. The technology perspective and capability roadmap (TPCR) is a summary document of the technology and capability requirements of the forces as laid down in LTIPP. The TPCR acknowledges the need for self-reliance in the defence sector and technological development that will help maintain military capability at desired levels. In fact, its focus is on “newly emerging areas of warfare that have been identified as essential for joint war fighting”. The TPCR details the necessity for advancement of joint war technologies and lists the products and weapons platforms that would be required by the different services. Notwithstanding these reports and plans, an analysis of the defence budget allocations not only suggests a lack of integrated planning, but worse, a deterioration in coordination.

Capital budget projections of each service are made based on their annual acquisition plan (AAP), a derivative of the services capital acquisition plan (SCAP), which is a five-year version of the LTIPP. The actual capital expenditure (capex) for the services has increased from Rs 56,621.68 crores in 2010-11 to Rs 73,652.81 crores in 2014-15. The revised estimates for 2015-16 are Rs 74,412.68 crores and the capital budget allocation for 2016-17 is Rs 78,731.32 crores.

The increase in the budget has largely been due to the air force and navy. The capex is a sum of capital acquisition and other capital (land and works, DRDO, DGOF and other defence departments). Capital acquisition for the army, navy and air force (percentage increase in 2016-17 over 2015-16) has reduced by 1.8%, 12.2% and 12.5% respectively. Furthermore there has been systematic under-spending by the armed forces in capital acquisition from 2012-13 (11%) onwards. The figures for 2013-14 and 2014-15 are at 9% and 13% respectively. In 2015-16, the under-spending is expected to be as high as 15%. The purpose of the LTIPP, SCAP and AAP is to increase capital acquisitions.

This is ironic considering that under-spending in the years immediately preceding the LTIPP was 4% (2009-10), 0% (2010-11) and 0.4% (2011-12). This begs the question if defence acquisition planning is indeed integrated.

Year Capital Acquisition (INR Crores) Under-spend (%)
Budgeted Estimates (BE) Actuals
2009-10 43701 41919 4
2010-11 47306 50186 -6
2011-12 56510 56282 0
2012-13 66032 58769 11
2013-14 73445 68850 6
2014-15 75148 65582 13
2015-16 77407 65742 15

The standing committee on defence report acknowledges that the ministry of defence (MoD) has surrendered as much as Rs 35,000 crore of its capital allocations over the last four years. The MoD had responded to the committee stating that the percentage utilisation of capital budget has always been around 100%. This, however, is only true if one considers the revised estimates rather than the budgeted estimates projected by the services or even those finally allocated by the ministry of finance. In its defence, the MoD has stated that it has come under constant pressure in its ability to spend the allocated monies. The only discernable reason for this could be that budgeted payments to vendors have not been made since deliverables have not been met. This is a reasonable justification. However, in the larger interest of national security and war preparedness, this reflects at the very least, nonchalance on the parts of both MoD and its vendors.

The lack of integrated planning is further reinforced by the fact that it is the army that suffers as a consequence. In 2014-15, the import bills for the air force and navy were approximately six times and three times the size of the army’s import bill, respectively. In the case of the air force and navy delays in contracts and therefore under-spending in capital acquisition is understandable on account of strategic and diplomatic delays. There is, however, no excuse for great delays in army procurement contracts as the majority are not just domestic, but public sector enterprises (DPSUs and Ordnance Factories Board). This is a classic case of one hand not knowing what the other is doing.

In the interests of national security, it is unacceptable for decision makers at the highest level to fail to integrate and coordinate, as it affects India’s capital acquisition and thereby war readiness. Coordination and integrated planning cannot mean the creation of a mere document, especially one that seems to lack any visible integrated national strategic framework. Integration should not take place as either a reaction or aftermath to a crisis situation. A re-structuring of the economic decision making process in higher echelons may lead the way to better integrated planning for the armed forces.

Nirupama Soundararajan is a senior fellow and Dnyanada Palkar is senior research associate at the Pahle India Foundation.