This video shows you that The problem with raising India’s Defence Budget to 3 per cent of GDP.
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Several quarters, including the Parliamentary Standing Committee on Defence, have asked that expenditure on defence be increased to at least 3% of GDP — it is widely believed that this will address the problems of national security, and underline the government’s commitment towards the military. An issue brief by the Institute of Defence Studies and Analyses (IDSA), a think tank funded by the Defence Ministry, examined the feasibility of a 3% floor earlier this month.
Relevance of GDP
At 1.49%, India’s defence expenditure as percentage of GDP is stated to be at its lowest ever, lower than what it was prior to the disastrous 1962 war with China. But this figure of 1.49% — or Rs 2,79,305 crore — does not include defence pensions and MoD spending. If both are included, the total defence expenditure rises to Rs 4,04,364 crore, or 2.16% of GDP. Data for the past decade show this figure, too, has been falling — it was 2.78% in 2009-10.
At Rs 4,04,364 crore, defence expenditure is currently 16.6% of the central government expenditure (CGE), and has been stable in the range of 16-18% over the past decade. But defence expenditure as a percentage of GDP has been falling because CGE as a percentage of GDP has come down from 16% to 13% over the past decade. This makes GDP a somewhat misleading metric for fixing defence expenditure.
Raising the defence budget to 3% of GDP from the current 2.16% will mean an increased allocation of Rs 1,57,305 crore — from the current Rs 4,04,364 crore to Rs 5,61,669 crore, or 23% of CGE. The increase would have to be on the capital side of the defence budget, since salaries, pensions and other operating expenses have full fund allocation with little scope to absorb extra funds.
The Defence Ministry’s capital expenditure of Rs 99,564 crore in 2018-19 is 33% of the government’s total capital expenditure of Rs 3,00,441 crore. Raising the defence capital expenditure by another Rs 1,57,305 crore to Rs 2,56,869 crore would increase this ratio to 85%. This would leave the government with very little money for capital spending, including for infrastructure and asset creation, outside of the procurement for the defence services. Moreover, as most defence equipment is procured from foreign countries, an increased capital budget would increase the defence import bill, and add to the current account deficit.
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