Grand Tamasha

Sushant Singh on India’s Defense Budget

Episode Summary

India lags behind its strategic competitors in defense spending, which might make it impossible to live up to its aspirations of becoming leading power the world scene. How should India address this problem?

Episode Notes

One of the most reliable laments about Indian defense policy is that the Government of India spends far too little on defense. Experts say this is a problem for at least two reasons. First, India lags behind many of its strategic competitors when it comes to spending—which only deepens the country’s asymmetry in capabilities. Second, without greater investment, India won’t be able to live up to its own rhetoric of becoming a leading, rather than a balancing, power on the world scene.

This week on the podcast, Milan talks all things defense policy with Sushant Singh. Sushant is the deputy editor of the Indian Express newspaper, where he writes about national security, international relations, the judiciary and investigative agencies. Before turning to journalism, Sushant served in the Indian Army for twenty years, including multiple stints in Jammu and Kashmir.

Milan and Sushant discuss the crippling costs of personnel and pensions, the classic “guns versus butter” debate, and the much-anticipated national security strategy.

Episode Transcription

Intro:                            00:00                "Unabashed" "The most unpredictable" "becomes a headline." "The most volatile" "outrageous behavior." “Unsubstantiated narratives" "A battle of personalities."

Milan Vaishnav:            00:11                Welcome to Grand Tamasha. I'm your host Milan Vaishnav of the Carnegie Endowment for International Peace. One of the most reliable laments about Indian defense policy heard from critics both at home and abroad, is that the government of India spends far too little on defense. Experts say this is a problem for at least two reasons. First, India lags behind many of its strategic competitors when it comes to spending, which only deepens the country's asymmetry in capabilities. Second, without greater investment, India won't be able to live up to its own rhetoric of becoming a leading rather than a balancing power on the world scene. Joining us to talk all things defense policy is Sushant Singh. Sushant is the deputy editor of the Indian express newspaper where he writes about national security, international relations, the judiciary, and investigative agencies. Before turning to journalism, Sushant served in the Indian Army for 20 years, including multiple stints in Jammu and Kashmir. He's the author or coauthor of two recent books, "Mission Overseas: Daring Operations by the Indian Military" and "Note by Note: The India Story 1947 to 2017." He's currently on leave in the United States where he's a visiting lecturer and political science at Yale University. I am pleased to welcome him to the podcast for the very first time. Sushant, thanks for coming on the show.

Sushant Singh:              01:17                Thank you so much Milan. Thank you for having me here.

Milan Vaishnav:            01:19                It's good to see you in the United States. I, this is a big topic and it's hard to know where to begin. So let's just start by getting some basic facts straight. How much does India actually spend on defense as a share of its GDP? As I've come to understand, there's this number which gets quoted around that India spends around one and a half percent of its GDP on defense. Although you have - you were telling me earlier that this isn't a totally accurate number.

Sushant Singh:              01:47                So there are two numbers which has thrown around. One is the 1.47 1.46% of GDP, which is which is the usual number which, which you hear. And the other number is 2.05% of GDP. And the difference between the two numbers is primarily the, the defense pensions budget, the pensions which are paid, paid to defense pensioners and slight amount of just spend by the Ministry of Defense. Now, the whole question of defense pensions are they part of defense budget or not is a vexed question. In India till the mid 1980s, the defense pensions were considered to be a part of the defense budget, but as it shot up to around 3.5-4% of GDP during the Rajiv years, they were taken out primarily to reduce the number and make it look better than better than what it is. But in the recent years the defense pensions have been more or less included in the defense spending. Uwhich is also what SIPRI, the Stockholm Institute for,uPeace Research, does when it counts the numbers.

Milan Vaishnav:            02:45                I mean, assuming this figure of around 2% of GDP is close enough to the truth, I guess one question that, you know, our listeners probably might be interested in is, you know, why should defense spending matter to anyone who is not a defense policy wonk, you know, what does this number 2% of GDP actually tell us about where India is headed?

Sushant Singh:              03:05                So essentially why, why defense spending is essentially the question why armed forces or why military. In an ideal world, there would be no armed forces and no military to the, the bigger answer would be why does, why does India have the military? So of course, to protect its territorial integrity, to safeguard its own sovereignty, to ensure that internal security and rule of law prevails in the country, to get the kind of position in the global committee of nations that it desires. That would be the more larger answer. But a more prosaic answer would be how much India spends on defense also determines how much India spends on its development. It's a classic butter versus guns debate in a sense. If India tries to spend more on defense, it would be spending less on development. And that is why it matters to every single 1.3 billion Indians.

Milan Vaishnav:            03:53                So I want to understand a little bit about what's going on inside of the spending. So, as I understand it, there's sort of three primary categories of what India spends when it comes to defense. The first is sort of personnel, human resources, which is, you know, salaries, pensions for retired service members, operating costs, which is just the day to day of keeping things going, and the new defense acquisition, right? Buying those new capabilities and hardware and so on. When you look at the current budget, how are things situated within those three buckets? So those three categories of spending.

Sushant Singh:              04:26                So if you look at the the budget for the current financial year, which is the financial year 2019-20, which started in 1st of April because of the India's financial year in finishes on 31st of March, the total spending by the Ministry of Defense is around $61.5 billion. You know, and it depends on the conversion rate. If the currency improves, it would look better. Uh the out of this pensions is actually 16 billion.

Milan Vaishnav:            04:52                Wow.

Sushant Singh:              04:52                So 61.5 billion is the overall defense spending out of which 16 - one, six - 16 billion is the pension, which is quite a significant number. And the equipment acquisition or capital procurement budget is actually $15.4 billion. So India spending more on pensions than it is spending on, then it's spending on capital procurement. The total operating costs, including the salaries and pensions is around 30 billion. That's what, that's how the budget [inaudible].

Milan Vaishnav:            05:17                One of the early challenges, the Modi government faced soon after coming into office was this long standing demand that had been made on the part of former servicemen for the government to enact a policy known as One Rank, One Pension. And I think the idea here is that, you know, service members should receive the same pension for the same rank and for the same length of service, irrespective of the date on which they retired. After a lot of back and forth, the government finally relented, implemented this decision. What impact did this have on the defense budget? I mean, did this essentially blow the retirement personnel budget out of the water?

Sushant Singh:              05:55                Not exactly but it had an impact of around eight and a half thousand to 10,000 crore rupees, which is not an insignificant number, but not really blowing it out of the out of proportion. I think. But this coupled with the fact that the new pay commission came in and the fact that the number of pensioners in India - defense pensioners - in India is increasing with the increasing lifespan. The fact that military personnel itself for far shorter period than what a civilian employees, non-military personnel serve for. So India currently has around a 3.1 million pensioners on its defense rolls. 3.1 million people are actually being paid by this thing and this number is increasing by the day. People are living far longer. So this number is increasing. And unlike civil pensions, civil services pension in India, which over the last 20 years or so, 19 years or so, have become contributory - that you contribute to the pension and you earn that pension - the defense pensions on India are government pay - they're still guaranteed in that sense.

Milan Vaishnav:            06:57                So you mentioned that the military officers serve for shorter tenures than civilians. Has there been any serious discussion of say, raising the retirement age that people can serve, you know, sort of longer?

Sushant Singh:              07:08                Yeah, Milan. That's a good question and I believe there was this proposal which was informally mooted and also formerly mooted in the ministry last year. Considering that the pension budget we're going out of out of hand and a proposal was mooted that could we extend these service for, for two years, both for officers as well as for our people below the officers rank? But eventually that would have also meant that there will be no recruitment, no employment taking place in India. And as you know from the latest NSO report that the youth unemployment in India is around 23%, 22.6% or something for people below/under 25 years of age. And considering that it would be a disaster if there was no further recruitment.

Milan Vaishnav:            07:49                So I think sometimes these debates can sound pretty esoteric and in the weeds for ordinary Indians and ordinary observers of Indian domestic affairs. But what are the real trade offs going on here? I mean, there was a story Bloomberg put out just a week or so ago. It said, you know, the Indian Army is going to reduce the number of sniper rifles it purchases by something like 70%. So by, by having this ballooning personnel costs being not able to spend as much on defense acquisitions what are the things that the Indian military is actually losing out on?

Sushant Singh:              08:23                So let me make two points here. One is, Milan, we must realize that as a percentage of GDP, whether we call it 1.45 or 2.05, whatever we may call it it is at, in a way, it is at its lowest ever in India's history, even lower than 1962 when India lost the major war to China.That is one. And number two, while we are spending as a percentage of GDP, far lesser, it is skewed towards HR costs. Those are the two fundamental points. And because of this, as you gave this example of of these sniper rifles where the Army had signed a contract and the Army had to go back on the contract and say we're cutting it down by 70% because it just doesn't have funds. So the biggest hit that is taking place is in modernization.

Sushant Singh:              09:06                That the, that the armed forces are not getting modernized fast enough and that, that imposes a huge challenge becauseIndia is in a neighborhood where there's China, there's Pakistan, there's all kinds of challenges in the Indian Ocean Region that are coming up. And even if India were to maintain its own position in the region and take these challenges, it will need the military strength. And Milan, as you know better than me, it's not that the military is meant just to fight war. The fact that if you do not have the military strength, you could actually be inviting war. As the famous philosophical argument for war goes, war only happens when two countries do not agree on each other's relative strength, and war ends when two countries actually agree on their relative strengths. So I think that's, that's one fundamental challenge in their faces with lower defense spending.

Milan Vaishnav:            09:59                So as we've face this kind of fiscal challenge, you know, there is right now the 15th Finance Commission going on. This is a body that looks at all the central government tax money and decides how it's going to devolve those funds to India's states. The center has reportedly asked this commission whose report should be coming out pretty soon, whether there should be a separate mechanism that would essentially fund defense and internal security. Now, for obvious reasons, this has raised the hackles of many state leaders who believe that, you know, you're going to earmark defense funds and that's going to come at the cost of money that's supposed to be devolved from the center to the states. What's the motivation behind this move? And is it likely to go through?

Sushant Singh:              10:41                See, essentially the motivation is very clear motivation is that the India's national security, India's defense needs more budget, more money and that money is very difficult to pull out of the current budget. Just to indicate as of now with the kind of you know, lopsidedness and the amount of money, 32% of India central government, that is the federal government's budget actually is spent on defense capital expenditure.

Milan Vaishnav:            11:10                Wow.

Sushant Singh:              11:10                Thirty-Two percent of India's capital, federal government's capital budget is actually spent on defense capital. Anything more, if you were to do, who would actually be not making any infrastructure and doing nothing else.

Milan Vaishnav:            11:22                Right.

Sushant Singh:              11:22                Thirty-Two percent is quite a significant number. So it's not really possible that, you know, the government of India should give more money and more and more money will come in and that would happen.

Sushant Singh:              11:30                And the primarily, the reason why the addendum was issued to the terms of reference to Finance Commission was to actually find a carve out a new mechanism, a new way for which for national security and internal security, if I remember right, both for the a Union Home Ministry and the Union Defense Ministry, find out a kind of/carve out a new piece of pie in the between. So the pie for development under the federal government under the central government remains intact and a new pie is created, which as you say primarily will probably come out of the more out of the states than out of the center or out of the federal budget.

Milan Vaishnav:            12:02                But if you read the sort of think tank reports, you know, we are after all sitting in a, in a Washington think tank, many analysts of India's strategic behavior insists that India has got to spend at least 3% of its GDP on defense if it wants to live up to its own strategic rhetoric. Sushant, what you seem to be telling me is that this is not even remotely a realistic objective, at least in the near term.

Sushant Singh:              12:25                Absolutely 3% would mean that you are already paying salaries and pensions to the, to the, to the number of people that you have in uniform. You are already running the Army well. You have the operating costs, they're training, they're doing everything else. Where will the money come in? Money will come into capital expenditure. Capital expenditure, if you're already spending 32% of 32% of your federal government's capital expenditure on, on defense procurement, you would be increasing it by what another, another 30-40%. So 70% of federal governments in their central government's capital expenditure would go on defense and only 30% of development?

Milan Vaishnav:            12:56                Right, and that 30% is going to roads and bridges and highways.

Sushant Singh:              12:58                Everything else. So you - Milan, you remember that when Pakistan became independent for first four years, it did not devote a single penny to development. It devoted everything to defense out of its central budget. So if India after 70 years of independence - 71 years independence/75 years, whatever 70/72 years of independence - would not be wanting a situation where it's spending more on defense than on development.

Milan Vaishnav:            13:21                But you know, there's this old saying, right? And you hear it almost every week either on social media or on op ed pages that the best foreign policy for India is 8% growth. Do you agree with that? Because if you grow the pie, then these things are more possible. Maybe not 3%, but you could increase expenditure on roads and you can increase expenditure on defense, right? You could have the guns and the butter.

Sushant Singh:              13:44                Yeah, absolutely. I think that is fundamentally the answer. The answer, eventual solution there's only one solution: higher economic growth, better quality of economic growth that would increase the pie. So even a 1.5% of GDP or 1.6% of GDP would go far longer than what it goes now. And second, of course is the share of federal budget as a percentage of GDP that has been declining over the past few years whether due to the taxation collections coming down or for whatever reason. Or maybe more, more production is happening in private sector. Somehow I think that needs to be stalled at some point in time where the, where the, where the central government or the federal government or the or the government as such, both the share gets more as I see it as a share of GDP than what it is currently getting.

Milan Vaishnav:            14:28                So I want to just focus a little bit on the defense acquisition capabilities part because that's something that, particularly for our international audience to the, to the extent that they focus on defense, they often talk about this. Our friend and colleague Dhruva Jaishankar who, who's at the Observer Research Foundation has written in a piece that, you know, India essentially aspires to do three things at same time: we want to acquire high quality equipment, we want to do so at a low cost, we want to do so in a short time frame. And he's basically said this is kind of an impossible trilemma that you can only do two out of three of these objectives at any point in time. Explain why.

Sushant Singh:              15:08                So essentially Dhruva puts it very clearly and very lucidly. That you want high quality military equipment in a short time-frame and at a low price. So essentially, you know, that all three things cannot be made. High quality equipment is in short supply. It is only with a few people. Not everybody would have it. Defense,uequipment in any case is a very specialist kind of equipment. And because its specialist kind of equipment, they are monopolies mostly,uit would not be available at a, at a low price. And especially if you put a time bar, that you want it immediately. So what happens in most of these cases is, as has happened with India historically, there's a crisis, then India goes and buys more expensive equipment. High quality equipment at very high rates but in the desired time-frame because then you are pushed down by a crisis or by an emergency. And that is a trilemma which cannot be fulfilled unless Indian defense production, indigenizes and India is able to create that kind of research and development and indigenization,uwhich would,uwhich would allow it to do it internally without going to a foreign supplier.

Milan Vaishnav:            16:14                Well, let me ask you about that. Because India is often hailed as one of the biggest, if not the biggest importer of defense equipment. But politicians have long-held, including this government, that it must indigenize its own defense production. Are we any closer to that reality in 2019 than we were say 20 years ago?

Sushant Singh:              16:35                The honest answer would be no. We're not, we're not really despite all the attempts to build a strategic partnership, Make in India, and so on and so forth that we have heard about in the last five to six years. Realistically not much progress has been made by India. And just a matter of fact, India is now the second or the last five years as per separated our India, the second largest importer. Saudi Arabia is the number one importer of defense equipment and weapon platforms in the world. And compared to China, China is now in number three exporter of defense equipment. It is now, it's actually exported defense equipment and, Milan, you will be surprised the biggest importer of Chinese military equipment are two countries in India's neighborhood: Pakistan and Bangladesh.

Milan Vaishnav:            17:23                Wow. Now, what does this mean for the United States? Because we were often told that the U.S. In India have this very deep and broad strategic partnership. There's an economic track, there is a defense strategic track. The economic track is most people know is going through, you know, some fair degree of headwinds. But the defense strategic track seems to be going forward, at least when you look at military exercises or mil-to-mil partnerships. But if some of these issues related to defense acquisition, procurement budgets are not resolved, does that essentially put a ceiling or a cap on how deep the U.S. And India can work together? Because you know you're talking about getting things at a low cost, high quality, short timeframe. To what extent is the U.S. Going to figure into that?

Sushant Singh:              18:08                Yeah. Milan, I'm sure you are stay in DC in a think tank and you hear it more than me that out here in DC. And what I have heard is clearly a kind of frustration with the Indian system, with the Indian government for not being able to take this partnership to the next level. Of course, a part of that frustration emanates from not identifying China as a common threat, et cetera, et cetera, but a large part of the frustration is the what many in the U.S. establishment believe is an unreasonable Indian demand for, for higher technology without having adequate safeguards and not signing enough contracts. The Indians believe that the Americans would want them to buy everything from the amount from the Americans, not from Russia or France or Israel.

Sushant Singh:              18:49                And so there's, it's almost seems to be like - it's not like there's a lack of trust or people can't work together - it's just, there's more frustration and more irritation with with the, between both sides about this. It is an irritant which needs to be removed whether it needs structural reforms on the Indian side, whether it needs a kind of better understanding by the Americans of the Indian mindset Indian approach and the Indian need for strategic sovereignty. This will need to be worked out otherwise it can be I don't want to call it a pitfall, but it can be problematic in the future. - The kind of voices, the kind of noises I've heard in DC are not very helpful.

Milan Vaishnav:            19:36                So I'm going to kind of take us forward a little bit. You know, the media has reported that the government of India is finalizing the new National Security Strategy. It's been prepared under the leadership of the National Security Adviser. What do we know about what's in the document and what bearing do you think it's going to have on this question We're talking about today of defense spending, defense allocations?

Sushant Singh:              19:55                The national security strategy, to the best of my mind, there have been three attempts to produce a national security strategy in the last few years. There was an attempt in 2007 where the integrated defense staff produced a national security strategy and gave it to the government, which was not released. In 2015, Shyam Saran, former foreign secretary, he was heading the NSAB and they gave a draft national security strategy to the to the government, which was again not released. Last year there was a national security strategy prepared as you said, by the Defense Council, headed by the National Security Advisor. And there has been a belief that a part of it will be made public and the as per whatever has been reported in the media. I did the same media reports that you have seen, I've also seen, actually is actually say that the that this would in a certain sense redefine the kind of threat that India faces.

Sushant Singh:              20:47                Because so far India has believed that there's a two front collusive simultaneous threat from China and Pakistan that the Indian military has to be prepared for. If the simultaneous part is taken away that you don't have to deal with China and Pakistan at the same time, it would mean that you don't need to have whatever. Therefore, the need for reduced conservation fighter fighter jets, the Navy doesn't need the a to be a 200 vessel Navy. The Army does not need four strike corps because then probably you can move your forces from here and resources from, from on one front to another, another front. That would be a big shift because that would mean that the shortfalls are not as glaring as what they are. But that would mean but that we are banking on that they would be a complete redefinition of the threat perception and the role which has been there for last 57, 58 years now.

Milan Vaishnav:            21:35                Let me ask you about something else with an eye towards the future. We know that the government has moved many additional troops to Jammu and Kashmir to keep the peace in the wake of Article 370. Do we know how many troops actually have been added over there? In addition to those that might be, you know, guarding the Line of Control

Sushant Singh:              21:55                See, I don't think they were any additional Army personnel moved to Jammu and Kashmir. The confusion occurs because of the paramilitary forces or the Central Armed Police Forces as they are officially called being mistaken for for the Army. So the Army has the people on the Line of Control which are, which have always been there and has the Rashtriya Rifles, which look after the, the rural and the semi-urban centers of the Kashmir Valley and also in the Jammu region and Doda region. But as far as the paramilitary forces or these CRP, FCPS, VSF et cetera, concerned I'd not number the exact number. I think around additional 50 to 60,000 a paramilitary forces, uh, personnel was sent to Kashmir after 5th of August or around there, 40,000 in one go and 50,000 in another go, that's what the numbers I have read my colleague [inaudible] at Indian Express has reported them.

Milan Vaishnav:            22:47                Do you think though, even if these aren't paramilitary forces, given the heightened sense of security threat the, the changing realities on the ground that this could be used perhaps as a pretext to argue for more resources for the armed forces? That, you know, we are likely to see people can't quantify exactly, you know, what the threat might look like, but an uptick in incidents given that Pakistan and groups that find safe-haven in Pakistan might want to retaliate against the Indian measures.

Sushant Singh:              23:19                Yeah, that's a, that's a good question. And actually, yes, that could be that could be put out as a pretext or reason for more funding, for better equipment. But I'll turn the question around a bit. In an ideal world, you would not want the army to be deployed on internal security duties whether it is in the Northeast or in Kashmir. So whatever those numbers are, if those duties can be handed over to the paramilitary forces, to the police - local police - then the, you can actually downsize the army to that number. Bringing down the HR costs and the skew - which is towards the HR cost towards the salaries and the pensions pay - that skew can actually be fixed to some extent if the internal security duties, were to be fully taken over by the paramilitary forces and the local police forces.

Milan Vaishnav:            24:07                Let me end by asking you a question that I asked Anit Mukherjee, our common friend who was on the show a couple of weeks ago who's written a brand new book about civil military relations. And one of the points that undef makes in his book is that there are shockingly small number of elected politicians in India who have a military background. Way smaller than you'd see in the United States in fact, by orders of magnitude. Do you think that there is a disconnect between civilian leaders and the military in terms of what the military sort of needs, what its requirements are, the shortfalls it faces the dramatic tradeoffs it must make in terms of balancing, you know, personnel costs on the one hand and acquisitions and capabilities on the other?

Sushant Singh:              24:51                I would not believe so. I remember Mr. Parrikar after Mr. Modi came to power in 2014, Mr. Parrikar became the Defense Minister after a few months. And I remember meeting him off and on during that period. Unfortunately he's no more, and he rather quickly picked up within I think three to four months he picked up what the, what the, what the defense services needed or what they did not need. He understood them. And and as you know, from your own experience of talking to people, most Indian prime ministers, at least in our memory, going back, going down to Indira Gandhi, Rajiv Gandhi, Narasimha Rao. They have been able to understand what the requirements are, what is needed. But they have made political calls. They have made calls which are very political. They have made choices, which they have known whether Mr Vajpayee and Brajesh Mishra or Dr. Manmohan Singh and Shivshankar Menon. They know what they were doing when they took those calls.

Sushant Singh:              25:41                So while it is true that they do not come from a military background, but I really do not understand that serving, let's say like Anit served as a major, I served as a as a lieutenant colonel. Would it make a difference if we were to become political leaders? Because politicians have to make far more policy decisions then then than this thing. But in this government general, VK Singh has been a minister for the last six years. He was a former army chief. Rajyavardhan Rathore, who retired as a colonel, was a minister, not in this government, but in the previous government. So we've had people I, you know, I'm slightly conflicted about the idea that only people who have served are better placed to understand the military or deal with it. That does not mean that people who have served cannot understand. Jaswant Singh being a fantastic example as somebody, as somebody who understood it. And as a, as a common friend I won't name him, says that if requirement, if serving in the military is a requirement for understanding the military, then is being a terrorist, a requirement for understanding a terrorist?

Milan Vaishnav:            26:41                So, you don't want to make any breaking news by announcing your transition to politics on this show. I think that's the message.

Sushant Singh:              26:46                Yeah, absolutely, absolutely Milan. I have no such desire to be caught in the whirlpool of politics.

Milan Vaishnav:            26:52                Uh thanks for coming on the show. It's great to see you and I hope that you've enjoyed your time at Yale and, and look forward to your regular reporting in the pages of the Indian Express.

Sushant Singh:              27:01                Thank you so much. Thank you so much for having me here.

Outro:                          27:06                The Grand Tamasha is a co-production of the Carnegie Endowment for International Peace and the Hindustan Times. You can find us on iTunes or wherever you get your podcasts. Don't forget to rate and review. It helps others find the show more easily. For more information about the show and to find the writing we referenced on this week's episode, visit our website Production assistance comes from Megan Maxwell and Rachel Osnos. Tim Martin is our audio engineer and Lauren Dueck is our executive producer. Thanks for listening and see you next week.