Serious consideration for a defence financing corporation, along the lines of the Indian Railways Finance Corporation, is needed

The unexpected new front opened by China in Ladakh in 2020 has multiple repercussions for India – from the tactical to the strategic level. However, the sharpest short-term impact will be it straining the already stretched defence budget of the three armed forces.

The year gone back has brought massive operational challenges that led to the army and air force resorting to emergency purchases for things ranging from ammunition to winter weather clothing and small arms.

A precise figure has not been put to the excess in spending, but the army has already moved the government for an enhanced allocation at the Revised Estimates stages, which could easily exceed over Rs 10,000 crore on the revenue side, given the emergency procurements.

The Ladakh factor is also expected to prevail over the coming years and a new front that will now need to be guarded at all times will come at a cost that needs to be factored in when the defence budget is allocated.

In simple terms, when it comes to pure hardware and resource mobilisation, it is well known that the PLA has a significant advantage. China’s annual defence spending – unofficial and concealed - is pegged at around $261 billion, with India at approximately $71 billion (SIPRI 2019). Chinese Official budget is $177 billion but it is estimated that the actual budget is one and a half times more.

It would be impossible for India to match the spending of this eastern rival but the need of the hour is a vital infusion of funds in the capital head to take forward some long-pending procurements that are needed even more urgently now. Major acquisition plans like new submarines, light helicopters, new transport aircraft, assault rifles and missile systems have been running behind time, some of them due to a lack of funds in the annual allocations.

At the core of the problem is the fact that there has been a consistent 25% shortfall between budget allocations and defence ministry projections. The total projection for both capital and revenue expenditure in 2017-20, according to the defence ministry’s calculations, was a little over Rs 13.4 lakh crore. What it has actually got was about Rs 8.39 lakh crore, with an approximate shortfall of Rs 5 lakh crore.

By defence ministry estimates, the defence plan projection, both revenue and capital, for 2020-25 would be around Rs 33.8 lakh crore, while the finance ministry’s medium-term expenditure framework caters for Rs 20-21 lakh crore.

This gap of over Rs 12 lakh crore needs to be bridged – a tough task for the union finance minister. Given that these calculations were made without factoring in the Chinese aggression in Ladakh, there is little room to negotiate down.

Armed forces officers say that if a large-scale conflict breaks out, they are confident that the government will come out with full monetary support. But, they warn, that it could be too late as force capability development takes years and cannot be bridged over at the last moment. As was evident from India’s emergency shopping list after the crisis broke out – ranging from light tanks to assault rifles – there is a clear gap that has to be filled quickly and consistently over the next few years as India faces a two front challenge.

The words of Army Chief Gen MM Naravane need to be heeded to. The top officer said that China-Pak collusion is no longer a concept in a theory paper but is very much playing itself out on the ground. This requires a response that includes reorientation of troops and a significant capability enhancement to take on the formidable Chinese threat.