Budget 2018 Opinion

We’re Still Paying for Kargil and Bangladesh

Defence pensions and salaries have become too bloated. We need to downsize the army.

We can never tell the true cost of war. Or the true cost of peace. But we can get an accounting cost of both war and peace. It is 2018, and the Government of India is still paying for the 1971 war and for the Kargil war. And for everything in between. Not in some convoluted manner – but as pensions to retired soldiers.

This year, the Government of India will be shelling out ₹1.08 Trillion on defence pensions alone. That’s almost $17 Billion. That’s double of what is being spent on NREGA. Three-and-a-half times what is being spent on public health and healthcare. Five times what is being spent on affordable housing. Close to five percent of the entire Government of India budget. High spending on defence pensions is not an old challenge either. Just five years ago, India was spending half that number. Today, it’s gobbling up a good chunk of our entire defence budget, and preventing India’s armed forces from entering the 21st century.

Of course, India’s soldiers do a great service to the country. Members of the armed forces are at constant risk, whether from sniper fire from across the Line of Control, the unstable Siachen glacier, or a moribund MIG-21. Having served for decades, it is both a written and unwritten compact that their social security is taken care of after they retire.

However, it is incumbent on the Government of India to think about the lifetime cost of recruiting soldiers or airmen before recruiting them. India’s government follows a system of cash accounting, which means that only money coming in and going out of the government’s accounts gets looked at. Any assets and liabilities get left out. Each time a jawan is hired, the government is implicitly allocating additional expenditure for the next 50-70 years, with politicians and bureaucrats expecting future generations to pay for this.

Bad planning and an absence of economic reasoning while doing defence planning has resulted in defence pensions rising from a modest 14 percent of defence expenditure in 2003 to as much as 31 percent in 2014-15. Another big chunk goes away in just salaries, leaving barely enough for weaponry, forget modernising that weaponry.

For each person presently serving in the armed forces, there are three to four people drawing pensions. The dangerous politics and absent economics of the One-Rank-One-Pension move have compounded India’s woes. Ajay Shah and Renuka Sane find that the implicit pension debt of defence pensions could be about 50 percent of GDP.

The Indian army’s problem is that it simply has too many people serving. Pensions payments have now been committed, and it will not do for the Government of India to go back on its word. But it must reduce the size of this problem going forward. China’s PLA decided to downsize its army by 300,000 people in 2015. Thanks to better roads and better equipment, a smaller number of Chinese soldiers are able to pursue their military goals along the India-China border successfully, against an Indian army with larger numbers that is bogged down by poor infrastructure.

Reducing the size of India’s armed forces might feel politically untenable. But twenty years ago, the idea of India’s nationalised banks massively reducing their workforces seemed untenable too. Computers made large bank workforces irrelevant, and modern military technology and new frontiers of conflict are making giant standing armies obsolete. India’s bloated defence staffing is a problem worthy of political capital spent by India’s civilian and military leadership.

An old joke about the British Airways was that it was “a pension fund with a small sideline in air travel.” The Indian Army, with about 13.5 lakh soldiers, can end up the same without a fundamental rethink of India’s defence policies.

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About the author

Pavan Srinath

Pavan Srinath is the Host of The Pragati Podcast and the Thale-Harate Kannada Podcast. He is a Fellow and Faculty Member at the Takshashila Institution, and tweets at @zeusisdead.