Spending on security

SMARTSHARE

The Union government allocates approximately 19-20 per cent of official GDP as its annual Budgeted expenditure. About 3-4 per cent of GDP is spent on the defence forces and another 1.5 per cent on central paramilitary forces like the BSF and Assam Rifles.

This estimate excludes expenditures on local police forces. It excludes SPG security costs. And, it also excludes allocations to intelligence agencies.

Put it all together and India spends something over 6 per cent of its GDP on security. And, the GoI allocates well over 25 per cent of its total expenditure to security needs. It's actually a far larger allocation than in most countries.

The need to spend on security obviously exists. It's a different matter that much of this allocation is wasted "" that's true of most government spending. Security is a shibboleth "" despite Bofors, Tehelka and the failure of innumerable R&D programmes for various obscure reasons, it's difficult to pin governments down to justify defence spending.

The US Defence Department has as murky a record in terms of audited expenditures "" Halliburton and its subsidiary, Kellogg, Root & Brown charged fabulous sums to feed US soldiers in Iraq and it got the contract through an opaque process.

But at least, private enterprise gets a crack at the US defence pie. It doesn't in India. Even in an era of successful public-private partnerships, private enterprise barely gets a sniff of this particular feeding trough. Large defence contracts go by default to PSUs; or these are farmed out abroad.

This is insane. It leads to strange outcomes where projects fail for lack of expertise despite the expertise being obviously available locally.

Recall that Indian auto and auto-component manufacturers are considered amongst the best of breed globally. Think of the famed Indian expertise in IT and IT-enabled services and solutions.

India also has the some of the best aluminium, steel, copper and forgings companies in the world. It has an awesomely competitive wireless communications sector.

None of the big names derive significant revenues from defence. The Indian Air force imports its avionics (often from Israeli firms, which sub-contract the work back to India); the defence research establishment fails to design tank engines and armour that works, the army is a decade behind in terms of field communications networks and IT-leveraging; the Light Combat Aircraft is two decades behind schedule.

If India Inc. got its share of defence contracts, there could be several favourable outcomes. One is that costs would come down and R&D efficiencies rise as best practices were deployed in a competitive environment.

The second outcome would be that the security environment itself would improve as equipment was developed and deployed quicker. The third favourable outcome: transparency in defence spending would increase since contract values would be reflected on public balance-sheets.

In terms of leaks, any private company is probably more secure than PSUs because the average private executive is less amenable to bribery. There could however, be one unfavourable outcome because a military-industrial complex could create a stronger lobby in favour of violent solutions to conflicts.

Things are slowly changing. The army is inducting locally developed handhelds and rolling out WANs. At some stage, India will develop its version of Thiokol, Boeing, Northrop and McDonnell-Douglas; all US corporate giants, which derive huge proportions of their revenues from defence.