India May Cut Defense Spending

Indian Defense Spending:

Earlier this year, India preserved $18.48 billion for arms and weapons deals in its 2021-2022 Defense Spending amid a border standoff with China and economic crisis caused by the coronavirus pandemic. Excluding the pensions, the new defense budget totals $49.6 billion, rising about 3 % from last year’s $47.98 billion. The new cost of $18.48 billion reserved for arms acquisition saw a rise of about 16 percent from last year’s $15.91 billion. This is the highest-ever increase in capital outlay for defense within the last two decades, consistent with Indian Defense Minister Rajnath Singh. In addition, an estimated $2.84 billion was used for emergency arms purchases within the summer of 2020 to help the continued confrontation with China on the border. The budget’s revenue expenditure meant for work on existing weapons, pay, and recurring expenses is about $29.02 billion, compared to $28.75 billion within the previous defense budget. Officials in India point to the COVID-19 pandemic as hurting the economy, affecting the annual income, and driving expenditure decisions.

Consequently, the defense budget won’t be as high because it would’ve been were there not an epidemic, said Amit Cowshish, a former financial adviser for procurement at the Ministry of Defense. Cowshish stated that the funds could also be inadequate for all the planned procurements from foreign countries and reception to be signed during the upcoming fiscal year, which began April 1. Capital expenditure is defense money meant for new arms acquisition and existing liabilities from already conducted security deals. The Army will receive $4.9 billion in cost, which is a rise of 8.17 percent from last year’s $4.53 billion. “The service could buy extra military vehicles and upgrade its existing drones fleet,” a senior Army official said. The service’s revenue expenditure is about $20.37 billion, compared to $20.11 billion within the previous budget. The Navy will receive $4.55 billion in cost, which is a rise of nearly 22 % from last year’s $3.73 billion. This might pave the way for the branch to shop for ten tactical MQ-9 Reaper drones from General Atomics through the U.S., an Indian military official said.

The revenue expenditure for the Navy is $3.19 billion, which is supposed for the upkeep of warships and submarines, compared to $3.13 billion within the previous budget. The Air Force will receive $7.2 billion in cost, which may be a hike of 19 percent from the previous year’s $6.05 billion. Consistent with a service official, this may go toward a replacement contract for 83 homemade LCA MK1A Tejas light combat aircraft, an existing agreement to buy 36 Rafale fighters from France, and five units of Russian S-400 defense systems, among other efforts. The Air Force’s revenue expenditure is $4.19 billion, compared to $4.1 billion within the last budget. About $1.55 billion in cost will go to the state-owned Defense Research and Development Organization for brand spanking new projects, compared to $1.47 billion within the last budget. DRDO has also been granted a revenue expenditure of $1.24 billion, compared to $1.2 billion the previous year. This year, existing liabilities could have up to 90 percent of the new cost, which can affect various new weapons acquisition efforts, an Indian official said.

The Fiscal Year 2021-22:

Despite the increasing border threats from both China and Pakistan and emerging security challenges for the country, India’s spending on the defense sector has been lowered by four % in India’s total spending over the last six years. In the ongoing fiscal year 2021-22, the BJP government has reserved a budget of Rs 4,78,196 crore of defense expenditure, roughly 13.73 % of the entire government expenditure parliamentary committee. This was a drop of 4 percent compared to 2016-17, when the defense budget was at a little over 17 % of the entire government expenditure. Since then, per annum, there has been a drop in defense expenditures within the government’s budget. In 2017-18, it was 17.73 percent of the total government spending, over 17% in 2018-19, a little below 17% in 2019-20, and further dropped to 14.05 percent in last year’s expenditures. It’s lowest at 13.73 percent at a time when the country is poised to spice up its military power to face the dual threats – China after last year’s standoff in Ladakh and Pakistan.

The findings are part of official statistics on the increase of the military budget in absolute and relative terms compared to the central budget and GDP, which is a component of a defense committee report. “The committee found that the entire Defense Budget (including Miscellaneous and Pensions) is Rs 4,78,195.62 crore for the year 2021-22, which is 13.73 percent of total Central Government Expenditure and a couple of. Fifteen percent of GDP for the year 2021-22. Also, the Capital Budget of the Ministry of Defense for 2021-22 is approximately 25.30 percent of the entire cost of the Central Government Expenditure,” the report said. Notably, the capital budget meant for acquiring new military systems and weapons stands at 25 percent of the entire cost. The ministry of defense stated that the quantity for capital acquisitions aimed toward the modernization of soldiers has increased by Rs 41,463.21 crore in absolute terms since 2016-17.

Impact of Covid-19:

At a time when the Covid pandemic is forcing governments worldwide to place cuts on expenditures, India has stopped 15-20% of funds meant for its Defense Ministry during (April-June). First notes of the halt on defense funding were visible when Defense Minister Rajnath Singh announced the termination of 9,300 posts within the Military Engineering Service (MES). A statement issued by India’s Defense Ministry said the decision was aimed toward rebalancing defense spending and further boosting combat capability. The posts are abolished within the industrial sector of the MES, which features a total strength of 13,157. “Restricting the civilian personnel has wiped out a fashion that the works of MES might be partly done by departmentally employed staff, while other works might be outsourced, “said the statement. On April 8, the Indian Finance Ministry, during a circular, asked all ministries to start cuts on their spending. Experts believe that if the purging continues within the next quarters, the allocations for the defense budget could nosedive to the maximum amount of 40%.

After witnessing a 7.3% economic contraction in 2020-21 – the biggest ever recorded by India – the comparatively muted recovery puts India at odds with developed countries like the United States and China that are seeing a fast rebound as they make their way out of the pandemic and further suggests more damage has been done to an economy worth around $2.9 trillion before the pandemic began. The road to recovery for the Indian economy might not be as easy a task as some think. The deadly second wave of the pandemic has left a disastrous mark on an already under-crisis economy. Defense cuts for an economic recovery are inevitable. The economic contraction of India is a fair reminder for the whole world to know the impacts of this deadly pandemic. India also will have to make some difficult decisions in order to make a recovery from the crisis that the pandemic has left the economy with.