India's defence expenditure engenders arguments. On the one hand, the annual defence budget is criticized by defence experts and former service officers as 'too little'; on the other, the same budget is criticized as 'too much' by people who have never been exposed to defence. Such criticisms often remain within the contours of defence vs. development debate. What is not probed is the scope for better management of the available budgetary resources.

Until nineties, India was a classic case of low GDP growth and low defence expenditure growth. After the economic reforms, India's GDP has grown on an average by more than 6 percent which has allowed double digit growth for defence expenditure. This, however, is not acceptable to defence experts who feel that the defence budget should be raised from present 2.5 percent of the GDP to at least 3 percent, a ratio maintained through much of eighties and strongly recommended by Parliament's standing committee on defence. Judging the cases of high defence expenditure growth in China and Pakistan, such a recommendation deserves a sympathetic consideration.

While a generous defence budget would always be welcome, prudent expenditure management can help overcome fund shortages. A major portion of the budget goes in revenue expenditure, thus adversely affecting capital outlay for modernization. This should be a concern in Army where manpower costs are on rise. If the global trend in manpower reduction and revolution in military affairs (RMA) is given some consideration, the money saved could be utilized to make the Indian Army technology savvy. Witness for example, the continuation of military farms, which if given up, could translate into substantial savings. Although there has been comprehensive delegation of financial powers for revenue expenditure in all the three wings of the services, there are still cases of project delays, cost escalation and even surrender of funds. While the procurement manual for revenue stores has come as a handy guideline, the integrated financial advisor (IFA) system has not boiled down to all levels. The IFAs are 'necessary evils' for expenditure management and hence should be institutionalized and strengthened.

A substantial proportion of the defence budget goes to capital expenditure and most of it goes for foreign procurements. While Indian money has substantially revitalized military industrial complex (MIC) in Russia and Israel and created jobs there, very little is left to invest in the domestic market. The ordnance factories and defence PSUs have not been able to reduce the country's dependence on foreign markets despite their long existence and full support from the government. Until recently, 'defence' was treated as a 'holy cow' and private sector had only a peripheral role to play in making supplies to the services. If the new procurement manual for capital stores is implemented in spirit, this will mean at least 30 percent of out flowing funds remaining within the country through an offset policy and requests for proposals (RFP). However, the government should consider some kind of preferential treatment for domestic suppliers including the private vendors. Only then there could possibly emerge a mature MIC in the country capable of arresting the outflow of funds.

An area which has not received requisite attention is investments in R & D. India is a laggard in cutting edge defence technology. Although the DRDO maintains a huge pool of scientists, the returns have not been encouraging. Part of the reason is low share in the defence budget that has averaged 5 percent. The last fiscal year saw this share jump almost to 6.5 percent. The money is still not sufficient to promote indigenization in terms of critical technology and ammunition design. While the Tata Group has recently announced to invest over Rs. 1000 crore for defence related R& D efforts and corporate buildup over the next 4 - 5 years, policy support is required to promote R & D by private sector.

The defence expenditure also needs to take a cue from military modernization in our neighbourhood. While China is pumping at least $ 60 billions in 'selective' modernization, Pakistan by investing mostly in nuclear and missile fields has achieved strategic parity with India. Against such trends, India's emphasis on 'incremental' and 'across the board' modernization serves little purpose. Instead, the spotlight needs to be on 'selective' modernization. Annual budgetary allocation could be supplemented by long term defence planning, fund commitments, and prevention of under utilization and non - utilization of budgetary funds to achieve modernization milestones.

Defence budgets in the last few years have been balanced as they have been impartial to the country's defence as well as developmental needs. Substantial additional funds are not likely to be available. Hence, better financial management of defence expenditure is necessary. Therefore, a new debate is necessitated about its possible reorientation in order to best serve our security interests.

(Views are personal)