2.

Critically examine the nature of defence budgeting in India and issues

related to it.

Intro: As India aspires to become a globally important player and play

a lead role in world politics we can do so only by keeping our frontiers
and borders secured and minimizing internal disturbances. Defense
thus is one of the strategic more important area of focus for us today.
The monetary allocation done under defense head in the budget is called
as defense budgeting.
Meagre Allocation:
At present India is allocating for defense close to three percent of GDP.
This is less amount considering the fact that we have two hostile
neighbors and also large numb er of internal security issues.
Need for modernization:
Modernization is the need of the hour considering the rapid strides that
the technology is taking which is enabling our adversaries to be
equipped with more sophisticated weapons .
In our total defense budget allocation unfortunately only 42% of the
budget is earmarked for modernization. The decision for addition of a
new mountain strike corp of 80,000 which will raise our military
strength to whopping 1.45 crore may further lessen the percentage
allocation.
Need to relook our policies & planning:

Most of our defense procurement contracts have carry forward payment

policy as a result the payment of installment for previous contracts
leaves a very little money for making payment to new contracts based on
present needs. A one time settlement of previous contract payment
should be done and as far as possible carry forward payment contracts
should be avoided.
Contract payments are based on foreign denomination. Fluctuation in
the currency markets adds to uncertainty in the final payment. We need
to ask our suppliers to accept Indian Rupee as mode of payment in order
to weed out currency fluctuations.
The number of clearances required before a contract could be finalized
and a order can be place is huge. This leads to delay in procurement of
strategic important items leaving our country exposed to threats.

 India is one of the largest importers of arms, we need to give a boost to

our indigenous industries, though 100% participation of private sectors
has bee allowed since 2001 however it is still subject to licensing, the
procedural delays discourages private sectors from entering into this
sector.
FDI in defense sector needs to be increased , foreign companies should
be encouraged to set up manufacturing base and to transfer technologies
for the subsidiary companies based in India.
In order to make revenue spending look less the government has shifted
purchase of spares and other items from revenue to capital account.This
has led to crowding effect on capital account and has led to lesser
purchase of capital weapons needed for boosting our combat power.
Our long term integrated Perspective Plan and Five Year Procurement
Plan are based on over-optimistic assumptions of (i)high growth rate (ii)
low inflation which complete opposite to our ground economic reality of
present. The plan should be made in sync with our economic conditions
and that the planning process should be under the supervision of one of
tri service chief for greater accountability.

Conclusion:
We need to increase our defense budget to better equip ourselves in
dealing with any kind internal and external adverse situations
More allocation of monetary resources should made for modernization
so that our defense is sync with rapidly changing arms technology.
Processing of orders must be expedited, a single window clearance can
be set up for reviewing the purchase orders.
Licensing of Indian Private players should be done away with in order to
ensure their greater participation, FDI should be encouraged along with
technology transfer by foreign players. This would reduce our import
dependency and increase competency for DRDO
Transfer back of items previously being purchased under revenue
account from capital account.
There is an urgent need to revamp our contract payment and plan
making policies for optimal utilization of our resources.