India must increase its Defense Budget to $60 billion…

India is a very large democracy surrounded by huge poverty all around. The Indian sub-continent has been unstable since it’s independence from the British in 1947. Pandit Nehru, the first Prime Minister of India mis-read the situation in the neighborhood and paid a heavy price in 1948. Jawaharlal Nehru had a different vision for India, some good some bad. Now India must follow the ‘Vision 2020’ articulated by former President Dr APJ Abdul Kalam (the 11th President of India). He envisions India to emerge as a fully developed economy by the year 2020, ready to lead the world with other countries like the United States, China and Russia. It is time India starts taking its responsibilities seriously and act accordingly. If it does not, it would undermine its own security in the long run. There is a power vacuum in South Asia and beyond, since the fall of Soviet Union. If this space is not occupied by a rising power like India, China is bound to spread its influence beyond acceptable limits.

Currently, India’s defense budget is estimated between $26 billion and $34 billion, depending upon what is included and what is not. Either way, it is way too small to reasonably fund its security and humanitarian commitments. At this stage you can not calculate the defense allocation as percentage of GDP. The total footprint is too small and the basic defense infrastructure is virtually non-existent. India must also stop worrying about China’s defense budget. We have very different problems and very different commitments. The next question is, how do you fund such massive increase in the defense outlays? Government of India, for some strange reason, has continued to depend on ‘Public Sector Undertakings’ for major defense procurements, including capital equipment. Besides, all major weapon systems are either imported or locally assembled at the ‘State Owned Enterprises’. This is a major reason why our defense requirements are not being fully funded.

This bureaucratic mind-set must change. India is no more a command and control economy. We have a large and responsible ‘Private Sector’. There are more than 50 billionaires in India, spread across all 35 States and Union Territories. They have the technologies and the infrastructure to start contributing in developing India’s Military-Industrial Complex. Our private companies are large and resourceful enough to form collaborations all over the world and develop the most complicated weapon systems around. But, India needs far more than weapons alone. We do not have any significant lift capabilities by land, sea or air. Earlier this year, India placed an order for 6 Hercules C-130 J military transport planes from Lockheed Martin of USA. The deal is worth around $1 billion and the expected delivery date is 2011 at the earliest. The fact of the matter is that we are immediately short of 20 such transport planes but cannot commit any funds because of budgetary constraints.

India needs a long-term and a medium-term defense procurement policy. Let us say, our medium term defense budget is $60 billion starting April 1, 2010 and increases to $120 billion by March 31, 2020. This budget must be equally distributed amongst all three services. Indian Navy must get atleast 30 percent of the budget, Indian Air Force and Indian Army too should get 30 percent each. The remaining 10 percent must be allotted to a new ‘National Guard’, like the one in United States. But the most important component of this plan is the participation of the Indian Private Sector. To begin with, atleast 30 percent of the budget should be allocated to the private sector and by 2020, increase to 70 percent of all procurement. For example, let us take the case of Super Hercules C-130 transport aircraft. If we need additional 120 Hercules, we would rather assemble them in India than depend entirely on Lockheed Martin, and by implication, the whims of the US Congress. In that case, the order would increase from current $1 billion to $20 billion. Indian companies, like Tata or Ambanis or even Larsen & Toubro, could form a joint venture with Lockheed Martin to produce the required number of transport aircrafts for Indian Air Force, Indian Army and even Indian Navy. This plan would also spur the growth rate of the Indian economy.