Army is drowning in hefty pensions and salaries

Piyush Goyal returned to time-honoured tradition budgetary tradition with the defence budget, exhorting India’s soldiers for protecting our borders in tough conditions. He proudly proclaimed how his government implemented the One-Rank-One-Pension, pending for four decades. Goyal also mentioned how much he enjoyed the film Uri, to a lot of table-thumping from his colleagues.

The defence budget, however, fails to make any departure from the troubles that ail it. The interim budget presented a budget estimate of ~4.31 lakh crore on defence, including defence pensions.

This is a 6.3% increase over last year – business as usual for a pre-election budget, but that has turned very expensive for India’s armed forces.

A full 24% of the defence budget, Rs1.12 lakh crore, is spent on defence pensions. The bulk of this is for the 1.3-million-strong Indian Army.

The Indian Army’s pensions and salaries alone amount to Rs1.82 lakh crores – a whopping 42 % of the defence budget. This situation is not new, but has continued to grow worse thanks to successive pay commissions, OROP, and India’s inability to reform and rethink the armed forces.

It would be in poor taste to connect the crash of a Mirage 2000 test flight at HAL in Bengaluru on Friday to the defence budget, but India has struggled to modernize its armed forces in the last decade.

A quick look at the capital outlay for defence suggests that there is Rs1.03 lakh crore for things other than salaries and operational expenditures.

However, most of this budget is locked up in committed liabilities, where India is to pay installments of purchases made 8-10 years ago. Since then, India has struggled to acquire new weaponry from rifles to aircrafts to drones thanks to an overly complicated procurement process.

The current furore over Rafale is but a symptom of the larger problem of India failing to modernize its armed forces, helping them enter the 21st century.

The Government of India is fiscally constrained, with sluggish revenue growth, a fiscal deficit that refuses to diminish, and growing demands for greater expenditure on welfare and development.

At such a time, India’s defence ministry urgently needs to work with the armed forces to make two things happen: reduce costs where they can and unlock new sources of revenue.

All of these are politically challenging and contested, but need to be confronted by any political party keen on winning the elections and forming the government come June 2019.First, reducing costs.

There has been no dearth of committees to re-examine the size and the nature of the Indian Army. Most recently, Lt Gen DS Hooda (retd) recommended a series of reforms late in December 2018.

This included a reduction in the size of a standing army and creating a reserve army, cutting 20% of the positions in select units. China started reducing its troop strength by 300,000 troops in 2015, and India only decided to suspend raising a Mountain Strike Corps in the summer of 2018.

While some have argued that this was done for budgetary and not strategic reasons, it is no way strategic to increase the troop strength of a 1.3-million-strong standing army in 2018 or 2019.

Second, unlocking new sources of revenue. Army cantonments are close to the hearts of many Indian cities today, and could be worth lakhs of crores in each large Indian city. Moving some of them to new areas could not only spur economic development, but also unlock new revenues for the armed forces.

This idea raises its head once every year or two, but is yet to receive serious consideration.

Indians engage in a lot of debate over MGNREGA, Universal Basic Income, Farm Loan Waivers and more – and rightfully so. Most of these ideas usually refer to government solutions that cost less than 1 or 2% of GDP. India’s defence budget remains larger and yet remains a holy cow for many.

It is telling that the government’s new basic farm income clocks in at 75,000 crore rupees, two-thirds of just the defence pension budget. This election season, we need to start talking about this elephant in the room that is India’s defence spending.

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