COVID-19 and India’s Defence Spending

The COVID-19 pandemic continues to take a huge toll on both human and economic front across the globe. The world economy is staring at the worst recession since the Great Depression of the early 20th century. India, given its early and timely decision to impose a nation-wide lockdown, has so far escaped a human catastrophe of the magnitude seen in several other countries. On the economic front, however, the deadly virus is wreaking havoc, with almost all major segments of the Indian economy either shut-down or operating below normal capacity. The Indian economy, which was slowing for the last several consecutive years, is now poised to record its lowest growth rate in the post-liberalisation period. The shut-down of factories, malls and businesses, in general, will severely affect the government’s budget and cash management.

Anticipating the deleterious effect of COVID-19 on its cash management, the central government has already started tightening its purse. On April 8, the Ministry of Finance (MoF) circulated an office memorandum, imposing expenditure cuts on several ministries and departments.1  The Ministry of Defence (MoD), which accounts for nearly one-seventh of the central government’s total expenditure, has been asked to limit its first quarter (April-June 2020) spending to 15-20 per cent of its full year allocated budget of Rs. 4,71,358 crore. From the defence ministry’s point of view, what is more worrisome is that its budget will remain under stress far beyond the first three months of 2020-21.

Because of the slow nature of economic recovery, India’s gross domestic product (GDP) is unlikely to witness a high growth trajectory anytime soon. The slow pace of recovery, whenever it happens, will affect the government’s revenue collection, especially the tax collection, which, in turn, will affect the distribution of the resources.

Even if the growth returns to normal soon after the lockdown is lifted, the MoD is unlikely to see a quick and major jump in its budget because of the likely reprioritisation of central government’s expenditure. The pandemic has yet again shown that the national security is much more than just military security. Its impact in terms of loss of human lives, extreme suffering of the population living on the margins, loss of jobs and other serious economic setbacks are no less than the ravages inflicted in an inter-state war. 

To fight the COVID-19 menace, the central government has earmarked an emergency fund of Rs. 15,000 crore.2 To prevent a similar pandemic from wreaking havoc in the future, India would require much higher spending particularly on healthcare infrastructure which has remained in a poor state due to decades of underfunding. Suffice it to say that in terms of density of medical doctors and spending on healthcare, India fairs rather poorly in comparison to many peer countries, including the BRICS (Brazil, Russia, India, China and South Africa) partners. At present, India has eight doctors per 10,000 people, compared to Brazil’s 21, Russia’s 40, China’s 18, and South Africa’s nine.3 India’s health expenditure is a mere 3.7 per cent of the GDP. The comparative figures for other BRICS countries range between 5-12 per cent.4

The inevitable reprioritisation of the central government’s expenditure in the coming union budgets would affect the resource allocations particularly for big ministries like the MoD, which will be forced to realign their business practices. However, the MoD, given the many radical reforms undertaken by the government in the recent past, is better prepared to withstand the likely resource crunch. The appointment of the first-ever Chief of Defence Staff (CDS) and the creation of Department of Military Affairs (DMA) under him are expected to enable the MoD to undertake the much-needed prioritisation of imminent expenditures.

However, any reprioritisation undertaken by the MoD in the short term is not going to be easy, considering that the MoD is already in the midst of a huge resource crunch. In 2020-21, the gap between its fund requirement and budget allocation was nearly Rs. 1,03,000 crore.5 Any further cut in the existing allocation or slow growth in the budget thereafter is going to be extremely painful and may affect the defence readiness, to say the least.

Since the MoD does not have many short-term measures to tide over the impending resource crunch without affecting the combat capability of the armed forces, it has little option but to think long term. It is in this context that Defence Minister Rajnath Singh held a meeting on April 20 with top officials of the MoD and the Services to review the status of the recommendations of the Shekatkar Committee,6 which was appointed by the government to suggest measure to improve the combat capability of the armed forces and rebalance defence expenditure.

While the MoD has implemented several recommendations given by the committee, they have not yet shown much result because of lack of focus on some critical areas of reform, especially those related to manpower. Rationalisation of manpower strength, both uniform and civilian employees, and more significantly the terms of engagement need a hard re-relook. Suffice it to add that the MoD’s manpower expenditure is exorbitantly high and clearly unsustainable for defence modernisation. Presently, it is spending over 60 per cent of its budget on salary and pension. In comparison, the US, the biggest military power in the world, spends 39 per cent of its total military expenditure in personnel cost. Some other major military powers such as the United Kingdom, France and China spend between 31-45 per cent.7 Addressing the manpower cost will go a long way in dealing with the COVID-19 inflicted resource crunch in a more sustainable way.

Views expressed are of the author and do not necessarily reflect the views of the Manohar Parrikar IDSA or of the Government of India.

• 1. “Cash Management System in Central Government – Modified Exchequer Control Based Expenditure Management”, Department of Economic Affairs (Budget Division), Ministry of Finance, April 08, 2020. For a review of the impact of MoF’s office memorandum on defence, see Amit Cowshish, “Coping with New Guidelines on Expenditure Management”, MP-IDSA Comment, April 13, 2020.
• 2. “Government of India sanctions Rs. 15000 crores for India COVID-19 Emergency Response and Health System Preparedness Package”, Press Information Bureau, Government of India, April 09, 2020.
• 3. See “Global Health Observatory (GHO) data”, World Health Organisation.
• 4. “Human Development Data (1990-2018)”, United Nations Development Programme.
• 5. “Demands for Grants 2020-21”, Standing Committee on Defence, Seventeenth Lok Sabha, Fifth Report, Lok Sabha Secretariat, March 2020, pp. 9-10.
• 6. Sushant Kulkarni, “Shekatkar Committee recommendations: Defence minister holds meeting with CDS, service chiefs, top MoD officials on implementation”, The Indian Express, April 21, 2020.
• 7. See “Defence Expenditure of NATO countries (2013-2019)”, NATO Press Release, November 29, 2019, p.13; and “People’s Republic of China”, Instrument for Standardised International Reporting of Military Expenditures, Fiscal Year 2017, United Nations Office for Disarmament Affairs.