Defense Budget of India

I: The Defense Minister approaches you to come up with a defense budget for the upcoming year. 

C: Just to reiterate, you want me to come up with the defense budget of India for the upcoming year. For that, I would like to know what is the ratio of the defense budget to the total budget.

I: Okay, so the defense budget is 15% of the total budget and 5% of the GDP. Now, can you calculate the current defense budget?

C: So, as the current GDP is $2.7 trillion. 5% of that would be $135 billion.

I: Okay. let’s not delve into numbers but tell me the factors you would consider for the same.

C: While creating the budget I would consider the following factors – current domestic issues, current geopolitical scenario, and defense expenditure. Now, the current domestic issues can be further divided into education, health, welfare, and other miscellaneous factors. We would also factor in the current geopolitical scenarios, in which China and Pakistan are our nearest enemies. We can base our estimated spending based on what they spend. There is also a threat of WW3 looming in the world which has been amplified by the current conflict between Russia and Ukraine, so the budget should cater to such emergency needs as well. We are also the largest contributor to UN peacekeeping forces which would require us to spend on the same.

I: So, how will you compare the defense spending of different countries, will you look at spending as a percentage of their GDP and try to match them?

C: No, I won’t be following that because different countries have different GDPs and thus % of GDP would not be a good estimate to compare different-sized economies. A better way to compare would be looking at the armament, weaponry, arsenal, and personnel with respect to our adversaries and trying to match and further supersede them in these.

I: Right, we can continue with the discussion on defense expenditure.

C: Defense expenditure would be impacted by 2 factors – last year’s expenditure & its utilization, and an estimated expense for the upcoming year. The upcoming year’s expenses can be further divided into purchases, past payments, and miscellaneous. The purchases can be divided into 3 services – Army, Navy, and Air force. The army is planning to spend on Sig Sauer rifles, which are replacing the existing INSAS rifles, new clothing, and equipment purchases such as helmets, night vision, and bulletproof jackets. The upcoming budget will also accommodate the training and salary of the Agniveers. On the Naval front, India aims to spend on purchasing new ships and upgrading its existing fleet to gain parity with China. The Airforce is also spending on purchasing Rafale and other 5th gen fighter aircraft, Apache helicopters, and other missiles & anti-air defense systems, while replacing the current Mig-21s and spending on R&D to develop an in-house gen 5 aircraft.

I: Okay, your analysis seems fair, but now when you approached the minister, you have been asked to cut down the budget by 15%.

C: So, in order to reduce the budget, I will identify the various cost centers – pension & salary, equipment purchases, operations, marketing, emergency fund, and other expenses. Now, I would investigate each cost center and find out if it’s feasible to reduce costs there. We can neither reduce costs in pension and salary as these are integral to the functioning of the armed forces nor can we reduce costs in the payments sent to the emergency fund. With the Make in India initiatives, we can reduce the costs of equipment purchases. We can also defer a few future equipment payments to reduce the expense burden. We can also improve the operational efficiency of the armed forces through the current ongoing joint command initiative by sharing the resources between the tri-services. For e.g., the army and Airforce can share their bases to cut down on expenses.

I: I think we are done here. Thank you.