INDUSTRY
DEFENCE
Moving towards self-reliance
Indian Defence creates western jobs and bails out collapsing western
economies. Descent from self-reliant ‘Made in India’ to ‘Imported
and Stamped in India’
With the budget out as usual at the end of
February let us focus on far reaching
implications that need to be understood in
terms of budget allocations to the defence
sector. The total defence allocation is
` 1.64,415 crore, which doubled from 2006-
07 budget of ` 86,000 crore. The current
nSrinivas Kidambi & budget defence spending is 4%; while the
Krishna Vayuvegula energy spending on oil is 27%.
Although, the defence spending increased
nominally by 11.6%, its real increase is only
8.47%. Adjusted to ‘manipulated inflation’
at 6% growth, it is 2.47%. Adjusted to food
inflation as of today at 10.4%, the growth
is negative. Why has the defence budget
doubled in the last half decade ?
The naïve answer is the modernisation
programme of armed forces, which is the
buzzword nowadays. The threats from China
and Pakistan compel modernisation drives.
Thus, the doubling of the budget. We are
allocating close to ` 70, 000 crore or USD
15.5 billion to buy modern equipments, fifth
generation multi role fighters, light
helicopters and 145 mm light howitzers. We
plan to spend in the next decade close to
USD 80 billion or ` 8000 crore for other
modernisation programmes.
According to one estimate, if the USD 80
billion is spent in India on domestic
modernisation programmes, we create close
to one million high paying jobs. Rather, by
showing that our enemies and their systems
posseses an existential and impending threat,
we try to buy ‘close to similar systems’ from
military industrial complexes of major and
minor geopolitical players who in the first
place armed our enemies with such
Business Economics 34 March 16-31, 2011
technologies. This guarantees thousands of
jobs to western geo-political players at the
cost of Indian jobs and self-reliance. Last
year, the Air Force buying 10 or so P-8 long
range maritime patrol aircraft at a cost of
USD 10 billion citing the security lapse of
26/ 11, was hailed in the US as a saver for
the 25,000 jobs that Boeing would otherwise
have laid off.
We have 10 lakh engineers graduating every
year in all engineering disciplines. Defence
self reliance with proper vision and planning
will create a huge job market for Indian
students and this will help domestic
economic spending and thus boost economic
progress as we can utilise our own resources
for this purpose. By buying the finished
goods from western geo-political players
we have to also supply them the raw
materials from India, which are needed to
make those gadgets.
Out of ` 70, 000 crore (USD15.37 billion)
allocation for modernisation, the Army gets
` 18,986 crore (USD 4.21 billion), Air force
gets ` 29,722 crore (USD 6.6 billion) and
for Navy and modernising naval fleets `
13,008 crore ( USD 2.89 billion). With
more than 70% of our equipment from
caskets (they should not be called coffins
as coffin is with a lid. We imported only
caskets without lids and lids are made in
India) to submarines being imported, most
of this money goes to maintaining jobs in
exporting countries.
The revenue allocation for defence ballooned
from ` 10,194 crore (1989-1990) to ` 87,344
crore in (2010-2011). This means that we
are paying now nine times more than what
we paid a decade ago. Which means that
the cumulative inflation in armed forces
revenue spending is 900% or rising at a rate
of 81% every year while food inflation as
of today stands only at 10.4%. According
to Rama Rao Committee, the domestic
research and development of defence
sustainability under DRDO is not giving the
expected results although 20% of the
budgeted allocation in terms of research
goes only to them. It stressed the need to
improve this and stop wastefulness of
resources.
Let us examine the existential threats coming
from Pakistan and China that prompt us to
rush to international arms supermarkets.
Pakistan with a USD 15 billion official
budget gets another USD 20 billion worth
of most modern hi tech gadgetry from the
US as part of their deal as the frontline state
fighting terrorism. This makes its defence
spending at par with India. It is the US that
helped Pakistan to become a formidable
adversary for the purpose of fighting
terrorism. Showing this as an imbalance,
Indians are going to the US to buy whatever
gadgets it offers as counter-measures for the
equipment supplied to our western
neighbours by the US. However, on the
question of spending their budgeted money,
Pakistanis are very intelligent and buy also
from China. Pakistan bought a squadron of
Multi Role Combat Aircraft JF-17 from
INDUSTRY
China in 2010. They never approached the
US to get almost similarly functional F 35 The revenue
A –Lightning which is priced at USD 110 allocation for
million a piece which Indians are
considering. defence ballooned
China with a USD 100 billion annual regular from ` 10,194 crore
military budget and an equal amount for (1989-1990) to
2nd Artillery forces (its missile forces,
shields and satellite and space forces), and ` 87,344 crore in
an equal amount for its CCIS (Chinese (2010-2011). This
Central Intelligence Services) surpasses
India. Its primary war doctrine identifies means that we are
the US as its primary enemy and it is gearing paying now nine
to meet that threat. Its doctrine of beg,
borrow, steal and re-engineer to suit domestic times more than
needs made it a frontline competitor of the what we paid a
US. It is China that replaced US as a main
supplier of many arms to Pakistan. Chinese decade ago. Which
are spending their USD 100 billion budget means that the
in China in Chinese currency. It is all a state
owned domestic programme. cumulative
Therefore, unless we redefine our priorities, inflation in armed
doctrines of both offensive and defensive forces revenue
campaigns and then reorient with a domestic
vernacular indigenisation programme, we spending is 900%
and our defence spending will benefit our or rising at a rate
foreign defence suppliers while millions of
qualified brilliant students starve for work of 81% every year
in India. while food inflation
— Srinivas is a Senior Research Associate and Krishna
as of today stands
is a Senior Analyst, Geo-Political Strategic Studies
Institute, (GPSSI) Hyderabad
only at 10.4%.
Business Economics 35 March 16-31, 2011