Contribution of the defence budget in nation building

“The willingness with which our young will fight in any war, no matter how justified, shall be directly proportional as to how they perceive the veterans of earlier were treated and appreciated by their country.”-George Washington

The outlay for defence in the budget presented by Finance Minister Nirmala Sitharaman on 23 July 2024 stood at Rs 6.22 lakh crore, including defence pensions of Rs 1.41 lakh crore. Surprisingly, there was no mention of defence budget in the speech of Union Finance Minister, a clear departure from the past. Defence Minister Shri Rajnath Singh welcomed the budget and congratulated the finance minister for presenting an outstanding budget. The total allocation of Rs 6.22 lakh crore is approximately 12.9 per cent of the total budget outlay for the financial year 2024-25.

To a common citizen, the budget allocation for defence may give the impression that Indian Armed Forces are an expensive proposition for the nation. After all, the Railways got 2.55 lakh crore, Home Ministry got 2.20 lakh crore, Agriculture was allocated 1.52 lakh crore, Transport & Highways got 2.78 lakh crore, Consumer Affairs and Public Distribution got 2.23 lakh crore and so on. It is also a fact that a common man thinks that only Indian Army is the one for which so much money is spent, largely because of the fact that Army has pan India presence and almost each village of the country may have some body in the Army. The aim of this article is to highlight the contribution of the Defence Budget in nation building and the value addition it brings to India’s economy.

First, some statistics. In terms of the Gross Domestic Product (GDP), the defence budget represents just 1.9 percent. We must remember that India is world’s fifth largest economy in terms of the GDP.  The highest military spending is obviously by the US, at 3.4 per cent of GDP, followed by China at approximately 3.0 per cent of GDP (based on the estimates of proclaimed & actual defence expenditure), Russia at 5.9 per cent of GDP, India is at fourth position at 1.9 per cent and Saudi Arabia is fifth at whopping 7.1 per cent of GDP. Given the precarious condition of its economy, Pakistan still spends 2.9 per cent of the GDP on defence. India has a land border of approximately 15,200 km and a coast line of 7517 km. With two known adversaries in Pakistan to its West and China to its North and East, India perforce has to keep a large standing Armed Forces, which roughly number 14 lakh, with Army having a major share at about 12 lakhs. China has the largest military with over 20 lakh active personnel; Indian Army is the second largest. Therefore, to keep such a large Indian Armed Forces, annual expenditure has to keep pace with rest of the world, with particular focus on the state of enemy military.

Here let me bring the concept of Comprehensive National Power (CNP). CNP is defined as the sum total of a country’s economic, military, scientific, education, human resource and political power in a given period, as also totality of its hard power, soft power and regional/global influence. In the current geopolitical scenario, a strong military is critical to maintaining an edge in the CNP over the known and unknown adversaries. But it is also important to know that a large military is not only meant to fight wars but to prevent wars. Yes, a strong and capable military mainly prevents wars because the adversary knows the commitment and resolve of the Indian Armed Forces. India just commemorated the silver jubilee of Kargil War over Pakistan. India continues to face China with equal might in the Eastern Ladakh for the last four years with unfailing tenacity and dogged determination. All thanks to a strong military.

Now let us look at the breakdown of the defence budget in the major heads. The modernisation of the Armed Forces has been allocated 1.72 lakh crores. The revenue budget which is meant for pay & allowances, fuel, ammunition and maintenance has been given 2.82 lakh crore. Defence pensions account for 1.41 lakh crore, which supports approximately 30 lakhs defence & civilian defence employees pensionary benefit. The government has assured to further improve One Rank One Pension (OROP) scheme which shows its commitment to the welfare of the veterans. The defence budget also includes Rs 23,855 crore to DRDO, Rs 7652 crore to Indian Coast Guard, Rs 6500 crore to Border Roads Organisation (BRO) and Rs 6968 crore for Ex Servicemen Welfare Scheme. Even NCC with a pan India presence has a much higher allocation of Rs 2740 crore, which is also partly funded by the state governments. Thus, the defence budget is a healthy mix of catering the needs of men, material and future requirements.

Now let us look at the macro and micro economics of the defence budget. Firstly, one can say with conviction that amongst all ministries, Defence Budget has no leakage. The budget is allocated to the different wings of the Armed Forces, say Army, Navy etc. and thereafter handled and accounted for by the respective finance planners. Even the capital expenditure for procurement of defence hardware, though done by MOD, goes through a rigourous acquisition process. Thus, the money allotted is correctly utilised with bang for the buck. Secondly, all the financial transactions go through detailed scrutiny at multiple levels. Also, there is no political and bureaucratic interface with any of the financial dealings, which invariably is the case with most of the ministries.

The ecosystem of the serving defence personnel, veterans and their families itself would be a staggering figure of about 1.5 crore. Add to these the people in the Defence Factories, DRDO outfits, Border Roads, NCC and the Coast Guard, we have another figure of approximately 1.5 crore population. With 62 cantonments and roughly 200 military stations across the length and breadth of the country, a large population of business, construction activities and daily wage earners depend on their livelihood from them. Accustomed to good quality of life when away from the borders, the uniformed community and their families are good consumers. No wonder that commerce and business has flourished around these stations. In addition, the serving personnel and the pensioners are loyal tax payers. The border villages invariably benefit from the presence of the Army, including the project undertaken by the Border Roads. As per my rough estimation, the entire ecosystem around the uniformed community would not be less than 5.0 crore population, all put together.

Another major growth driver is the flourishing defence industry in the private sector. With the focus of the government on being Aatm Nirbhar or Self Reliant, private industry has been given sufficient incentive to Make In India. The share of private industry in Defence sector is already about 25% of the total defence production of around Rs 1.2 lakh crore, with Rs 35,000 crore of exports. The results have been encouraging and it is believed that defence manufacturing would be major driver of economy in the times to come. The Armed Forces and the defence industry are supporting a large number of Start Ups and some of them have already shown great promise.

Indian Armed Forces are also the most visible event organisers in the country. Right from the impressive Republic Day Parade on January 26 to Vijay Diwas on December 16 to commemorate victory over Pakistan in the 1971 war, the calendar is full of dazzling and solemn events, which itself should be a mini-industry of sorts, similar to wedding industry. This was just to exemplify how the Armed Forces provide job and earning avenues to a large section of the population. Another major support is to the pharmaceutical industry through the Ex-Servicemen Contributory Health Scheme (ECHS) meant for the medical treatment of the veterans and their dependents. The overall budget for the hospitals, treatment and medicines is more than Rs 6000 crore.

Given the geopolitical instability in the world, more profound now with the ongoing Russia- Ukraine War, China’s assertions and ever-expanding conflict around Israel and its adversaries, it is no less a miracle that India has grown not less than 7 per cent GDP per annum and has overcome the biggest crisis of COVID 19 pandemic. This largely has been possible because of the stable borders, safe coastline, improved internal security dynamics and the visible and invisible contribution of the armed forces in nation building. The defence budget of approximately 13% of the total budget outlay is the best investment in the growth and development of the country which continues to pay rich dividends, directly and indirectly to achieve the desired CNP in the national interest.