The Budget brings both good news and bad news. First, the bad news. From the point of view of self-reliance in defence production, there is a surprising reduction in allocation to R&D from Rs 10,539 crore in 2011-12 to Rs 5,995.56 crore. (see graph)

In fact, China which used to be the largest importer of arms during the last decade, has built admirable indigenous capability by heavily investing in R&D within the country and even poaching scientists from Russia. In our case, the services seem to have won the day. Instead of working closely, for instance, to make a success of the indigenously developed Tejas (Light Combat Aircraft) and Arjun (Main Battle Tank) despite good showing in trials, they seem to have taken a greater slice of the pie for procurements from abroad.

The good news is that in the battle between guns and butter, for the present, guns have not been sidelined. Ahead of the Budget, when the Army was reportedly requested to return Rs 4,000 crore, one wondered if this belt-tightening would be applied to the ensuing Budget.

Also, when China in February this year, enhanced defence spending by 11.2 per cent to a whopping Rs 5,24,000 crore and spread disquiet in Japan, South-East Asia and Taiwan , observers thought what would the other big Asian country, India, do.

Strategic shift

Superficially though, it seems, India has responded by increasing the defence Budget by a hefty 17.9 per cent from Rs1,64,414 crore of the previous year to Rs 1,95,000 crores and for capital acquisition by 15 per cent from Rs 69,198 crore to Rs 79,578 crore, it should be noted that even after the increase announced in this Budget, India's Defence expenditure is just less than one-third of China's annual outlay and 1/15th of the US.

In resorting to such a hike it may have taken into account the strategic shift in the US which was unveiled by the US President, Mr Barack Obama, in January this year to rebalance towards the Asia-Pacific region. More significantly, it displays the determination to contract for multi role fighter aircrafts, Trainers, Light helicopters and light howitzers. More important than analysing expenditure for the maintenance of more than a million strong military, what is necessary is a closer review of the outcome.

The Minister of State for Defence, Mr Pallam Raju, stated some time ago that military modernisation entailing an expenditure of $100 billion will be completed before 2015. Now, the Ministry of Defence cannot fault the Finance Minister as being tight-fisted. The Ministry should get its act together and ensure timely placement of orders for vital equipment.

JVs by Defence PSUs

Equally important good news is the announcement of approval for setting up joint ventures by Defence PSUs in PPP mode to boost indigenous defence production, particularly state-of-the-art equipment.

But whether this is enough to interest weapons manufacturers of advanced technologies in the West, or even countries such as South Korea, without taking decision on FDI, remains to be seen.

Our experience has been that Ministry of Defence busies itself with setting up new organisational structures, and codifying procurement procedures which seem to be taking forever while little else happens on the ground.

(The author is former Member, Ordnance Factories)

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