Why India Needs an Outcome Budget for Defence

10 Dec, 2014    ·   4769

Bhartendu Kumar Singh argues that it is time to give more teeth to outcome budget endeavours in the Indian defence sector

Outcome budgets have emerged as the toast in the financial administration under the Union Government, as made evident recently in the Indian Prime Minister Narendra Modi’s interactive session with the secretaries to the Government of India. While the Indian Ministry of Finance’s (MoF) guidelines have been there since 2005, the new political initiative emphasis is likely to give an impetus to the outcome budgets by many ministries. However, the defence sector is yet to reap the dividends of outcome budget.

Contemporary literature is not unanimous about the utility of outcome budgets in defence and there are several sets of competing perspectives. According to one view, defence should be kept out of the outcome budget since there are issues of secrecy, sensitivities and operational preparedness. National security, according to this view, should not be subjected to public scrutiny since it may jeopardise vital security issues in numerous ways. Proponents of this hypothesis give little space for demands of transparency and ‘value for money’ in the administration of huge public money. The alternative view is that when all other sectors are open to public scrutiny, why not defence? It emphasises upon the need to look beyond the ‘defence as a holy cow’ approach and instead to adopt an approach where there is a larger accountability for the penny being spent and institutional transparency established through a system of checks and balances. 

Yet another view treats defence as something that cannot be measured in terms of economic goals like outcomes. It cannot be compared to sectors like rural development where there are measurable mileposts like jobs being created through the MNREGA or roads being added in terms of kilometers under the PMGSY. This is contradicted by the alternative view that views defence as a huge sector having many sub-sectors that can be assessed in terms of outcomes. Moreover, outcomes need not be always assessed in terms of tangible and physical milestones. There can be variable modes of outcomes in defence sector such as combat preparedness, training, life cycle costing, teeth to tail ratio etc.

Perhaps, sensing this, the Departmentally Related Standing Committee of the Parliament (DRSC) on Defence has been encouraging the Indian Ministry of Defence (MoD) to consider opening up of non-sensitive sectors despite the fact that all the eight demands for grants in the MoD remain exempted from the Guidelines on the Outcome Budget issued by the MoF ever since its inception. A cue is taken from the Guidelines itself which says that “even the Ministries / Departments and other authorities ‘exempted’ from the preparation of outcome budget and placing it in public domain are requested to carry out this exercise for internal use and voluntarily decide to place it in public domain fully or partially.” A good beginning has already been initiated wherein the MoD has assured the DRSC to consider an outcome budget for the married accommodation project (MAP), the NCC and the naval dockyards. 

However, there are many reasons that call for encouraging and institutionalising the fledgling domain of outcome budget in defence. First, the defence sector accounts for huge revenue expenditure, which, if properly monitored, can facilitate in curbing avoidable and wasteful expenditure and contribute to fiscal deficit management. To give one representative example, the Comptroller and Auditor General of India’s Appropriation Accounts has been mentioning military farms suffering from losses year after year; popping up the debate if we really need military farms or in-source the milk products at cheaper rates from the market. Highlighting such issues, the VK Misra-led Defence Expenditure Review Committee had made several recommendations that deserve consideration at policy level.

Second, several big ticket capital projects such as the Light Combat Aircraft, the Main Battle Tank Arjun etc. have undergone time and cost escalation due to delays in their project development cycles. The investments being very huge, ways and means need to be there to optimise public investments simply because the government has scarcity of resources.

Third, the Indian defence budget is highly transparent; a fact substantiated in Transparency International’s indices. A series of policy pronouncements like defence procurement procedure, defence procurement manual and defence production policy have established new benchmarks in defence budget management. It is only logical to develop quantifiable deliverables and physical outcomes to get the best value of money.

Fourth, India does not have the luxury of liberal financial allocation for the defence sector. The defence budget is hovering around 1.76 per cent of the GDP and 12.78 per cent of the central government expenditure and is likely to remain there based on the recommendations of the 13th Finance Commission. There is, therefore, no escape from prudent defence budget management in order to get the best value of every penny being spent.

An essential prerequisite of the outcome budget is to have an oversight mechanism. Fortunately, the DRSC on Defence has been quite active and acts as the best oversight mechanism on various issues related to defence management. Honourable members of the Committee have been quite sensitive to outcome budget as reflected in their qualitative and thoughtful reflections. Perhaps, it is time to give more teeth to outcome budget endeavours in the defence sector. 

Note: Bhartendu Kumar Singh, PhD, is in the Indian Defence Accounts Service. Views are personal.