There is a new confidence in the country that we can sustain an average of 8 per cent economic growth in the coming years. Prime Minister Manmohan Singh is setting his sights even higher. That would indicate that this would release more funds in the future for our defence. But the reality is that competing priorities would demand more and more of national resources if economic growth has to be kept up and people’s aspirations met. This makes a scientific approach to defence finance and economics crucial and sharing experiences and ideas from experts across the world timely.

For a variety of reasons our defence spending had slumped after 1987. Our defence expenditure averaged just about 2.3 per cent of the GDP for the past 15 years compared to the 3 per cent level spent in the previous 15! Coupled with the depreciation of the rupee against foreign currencies, and the disintegration of the Soviet Union and our own economic difficulties of early 1990s, this has had a deleterious effect on our military modernisation and defence preparedness. This has begun to recoup somewhat in the past two years. So where do we go from here?

There can be no doubt that an expenditure of 3 per cent of GDP would be quite affordable, as indeed it was in the past when it provided credible deterrence against any aggression. It is easy to argue that India’s expanding economic and strategic interests would require such an investment for the coming decades especially since the existing shortfalls and backlogs also must be catered for. We are living in a difficult world full of uncertainties; and a range of capabilities are needed for the future. For example, our increasing energy import dependency and consequent vulnerabilities due to political uncertainties and potential instability in the oil producing region of West and Central Asia, the internal war in Baluchistan, etc. may require military capabilities to protect our interests well outside our borders. The Lebanon War last summer required the evacuation of a couple of thousands Indians from the war zone, a task admirably performed by the Indian Navy. A lesser crisis in Arab states of the Persian Gulf where over 4 million live and work could pose unprecedented challenges.

No country can afford both a high-cost large-size military manpower and a high-technology (inevitably also high cost) military system. And our military manpower costs have been rising at over 11 per cent annually. Defence pensions consume fiscal resources equal to around 16-17 per cent of the defence budget. A highly professional military force like ours inevitably seeks high-technology capabilities. This has become an even greater imperative in view of both our key neighbours, China and Pakistan, investing heavily in military modernisation with state of the art technology. It is not surprising that China cut back 200,000 troops last year from its army to modernise the air force, navy and the missile forces even with an average 12 per cent growth in defence spending in real terms over the past 15 years.

A firm minimum figure must be accepted and endorsed at the highest political level if defence planning, which has a long-term gestation cycle, is to be realistic. This figure can be expressed in GDP proportion, as a proportion of central and/or government expenditure individually or collectively as recommended by the National Security Advisory Board six years ago. Given the Accountability Act and needs of macro-economic planning and fiscal prudence there will be an upper limit to available resources for defence. Current trends indicate that this is likely to be closer to 2.4 per cent of the GDP (growing at 8 per cent annually) for the next 15 years.

In order to manage at this or any other level assessed by experts (assuming that the finance ministry is willing and able to stick to it), a serious re-examination of our approach to defence planning would be needed. Defence planning is actually fiscal planning for defence: and fiscal planning for modernisation of men and machines is its most crucial aspect. For example, we may or may not cut the size of our military manpower since that decision must be based on actual operational tasks and needs. But we must reduce the costs of manpower with better planning. This becomes a greater imperative since the manpower for the future, of necessity, also needs to be high quality and hence even more expensive.

Given the complexities of modern military manpower planning, what is needed is a dedicated expert task force to examine various options and their implications if we are to manage the crisis of military modernisation that has already hit us. Meanwhile the bipartisan standing committee on defence of the Parliament needs to take a closer look at the issues involved in defence finance and economics. The Planning Commission has traditionally ignored defence planning and budgeting: but can it continue to ignore the imperatives of even developmental planning without paying attention to defence finance and economics? We badly need expertise in the country in this field. The Defence (Finance) Division should plan for follow-on studies and measures in this respect if full value of the energy and effort in convening the conference on the crucial issues affecting defence policy is to be realised.

The writer, a retired air commodore, is director, Centre for Air Power Studies