Policy Pak

by IRFAN SHAHZAD TAKALVI on February 21, 2020

Every year in spring, at the time of unveiling of annual Union Budget in India, all eyes in Pakistan are usually fixated on one major aspect of New Delhi’s finances for the coming fiscal year: the defence budget. Understandable!

However, ‘intelligentsia’ in Pakistan need to understand that there is a whole lot more of other aspects assuming strategic significance for Pakistan in India’s budgeting than only the defence expenditure component of it.

The budget is not merely a statement of income and expenditure of any government. The set of budget document actually indicates the direction in which a government is trying to steer the country, and the way it wishes to position the country at regional and global levels. The following brief paper is an attempt to understand India’s budgetary allocations from a Pakistani perspective.

Basics first!

India’s fiscal year runs from April 1 to March 31; and Indians are fond of explaining the amounts in lakhs and crores, not in millions, billions and trillions as we here in Pakistan do. Another thing to note is that both Pakistan and India exclude pensions paid to retirees of defence forces from what is known as defence budget.

The cost of muscle to show: defence expenditure

For year 2020-21, the BJP government has allocated Indian Rupees (INR) 3,23,053 crore (three lakhs, 23 thousands and 53 crores), which is about $45.8 billion at current exchange rate, for ‘defence services.’ This excludes pensions and running of the defence administration – the ministry and the departments so concerned. For comparison, Pakistan’s defence expenditure for the running fiscal year, 2019-2020, was kept only slightly changed at Pak Rupees (PKR) 11,50 rupees, coming to the tune of $7.5 billion as per current exchange rate. So, here we have a ratio of 1:6, meaning that India spends six times more as compared to Pakistan, on ‘defence services.’

It is important to note here that for outgoing fiscal year, New Delhi’s allocation for defence was 306,296 crores in initial Budget Estimates (BE), which has now shot up to 316,296 crores in Revised Estimates (RE). This is a significant 11,000 crores INR ($1.53 billion) increase. Budget documents explain it as “large requirements under capital acquisition/procurement and for payment of salaries and other functional requirements of Defence Services.”

India’s Capital Outlay of defence expenses for 2020-21 – 1,13,734 crores, which means a whopping $16 billion – alone dwarfs Pakistan’s total defence services outlay ($ 7.5 billion) by a big margin, the former being significantly more than double of the latter.

And all that is meant for defence purposes not necessarily spent under the title of defence spending. Just to cite one example, the country’s Department of Telecommunications would be spending 50,00 crores – yes, $ 700 million – to lay “Optical Fibre Cable based network for Defence Services” during 2020-21. Slightly lower, 4750 crores, are being spent in the outgoing financial year, already.

Modi’s Kashmir move hits hard on Indian finances

Do we in Pakistan know that how much toll Modi’s move of illegal bifurcation of occupied Jammu & Kashmir is taking on India’s public finances? Here is just one indication: the biggest ‘variation’ between the Budget Estimates and Revised Estimates for outgoing fiscal is in the head of “Grant in Aid to Union Territory Governments.” This expense increased to 2,81,94 crores (just below $ 4 billion) from 97,28 crores – an increase alone of 1,84,66 crore – yes, increasing by $2.58 billion. Budget documents explain: “grants to recently reorganized Union Territories of Jammu and Kashmir and Ladakh in lieu of Finance Commission Awards and State share of Net Proceeds of Central taxes.”

And this is not the only head where Kashmir is costing India’s public finances. Expenses of police also shot up by 5510 crores ($770 million). No wonder some 92 companies of Central Armed Police Force were removed from J&K in December 2019, after being stationed there following the August 5, 2019 move.

And who, in India, is paying for this? The poorest of the poor among 1.4 billion Indians! The amount of food subsidy set for 2019-20, decreased from 18,42,20 crores to 10,86,88 crores – a massive decline of 75532 crores ($10.56 billion.) Budget documents explain this in only two words: “lower requirements.” Have the Indian people suddenly come out of the state where they needed food subsidy? Yes, because BJP had won elections early on in the outgoing fiscal year.

For 2020-21, the amount to be transferred to J&K stands at 3,04,78 crores ($4.28 billion). Another 4077.5 crores ($570 million) goes to Ladakh, the new Union Territory carved out of now divided Indian Occupied Kashmir. Some amounts have also been set aside to provide scholarships to Kashmiri students. Buying loyalties, or appeasing the Pundits’ community? Perhaps both!

Beyond defence and Kashmir

As mentioned above in the beginning, there are some other heads that are of strategic significance from Pakistan’s perspective.

Atomic ‘energy’ budget shoots up to 1,82,29 crores ($2.55 billion), from 1,74,25 crores spend in outgoing fiscal year. In fact, initial budget estimates for 2019-20 were 1,69,25 that exceeded by some 500 crores. Similar ‘variation’ for 2020-21 cannot be ruled out. Let us not forget that several of India’s nuclear reactors remain outside IAEA safeguards.

Space Aambitions: Space programme is next. For 2019-20 India had allocated 1,24,73 crores for its space program but despite the failed attempt to land Vikram on the moon, budgeted expenses exceeded by 666 crores, going up to 1,31,39 crores, just less than $ 2 billion. There is no let up. Aspirations to land on the moon and dominate the outer space further take the budgetary allocations for space programme for 2020-21 to 1,34,79 crores just marginally below $ 2 billion.

Hydro-aggression? Water Resources, River Development and Ganga Rejuvenation get 89,60 crores ($1.2 billion) in 2020-21, up from 75,18 crores spent in 2019-20? How much of this would be used to finance Modi’s water aggression against Pakistan – which he had warned of, more than once, openly – becomes a pertinent question for Islamabad.

Fostering diplomatic influence and soft power

Interestingly, allocation for India’s Ministry of External affairs goes slightly down to 1,73,47 crores, from 1,73,72 crores spent in 2019-20. However, New Delhi continues to allocate over $ 1 billion – 74,50 crores to be exact – in the name of “Grants and Loans to Foreign Governments”, which too is slightly above 74,22 crores spent in 2019-20. As understandable, Bhutan with 28,85 crores gets the lions share in this allocation but Afghanistan, Maldives, Nepal and Bangladesh are also allocated significant amounts. Any doubts why some of these countries follow the Indian line in SAARC?

Beyond SAARC members also, there are big amounts set aside for island states such as Mauritius, Seychelles – indicating New Delhi’s ambitions for the so-called Indian (which in fact is Afro-Asian) Ocean. Myanmar, African and Eurasian countries get special sums allocated for 2020-21, as was the case for outgoing and previous years.

Four more types of allocations are significant to understand from Pakistan’s perspective, when we look at how India fosters its diplomatic influence:

First, a head titled as Special Diplomatic Expenditures is allocated 28,00 crores for 2020-21; this is a huge sum of $ 391 million, and up from 27,63 crors spent in 2019-20 as well as a similar allocation in the year before, 2018-19.

Secondly, 17,56 crores – which becomes $ 245 million – is allocated for “Contribution to International Bodies”. This 2020-21 allocation, however, is below 23,41 crores Revised Estimates for 2019-20, which was 20,32 crores in Budget Estimates for the year – so actual spending exceeding the 2020-21 Budget Estimates is not unimaginable. Here, some allocations go towards BIMSTECH and SAARC Secretariats but more significant are those for IAEA and the United Nations, which one can easily make sense of seeing in the light of India’s regional, global and nuclear ambitions.

Thirdly, sizeable allocations for South Asian University (325 crores) and Nalanda International University (250 crores) as well as scholarship offered to international students tell us how India is sometimes labeled as ‘incredible’.

And, fourthly, how ‘Yoga Diplomacy’ is taking ‘Brand India’ worldwide? Interesting numbers here: for 2020-21, INR 21,22 crores are allocated for the Ministry of Ayurveda, Yoga and Naturopathy, Unani, Siddha and Homoeopathy (AYUSH). This is a big amount: almost $ 300 million.

The last word: misadventures on borrowed money

Pakistan is deep down in debt, it is well-known. But on that side of Wagah, much of Modi’s egoistic, jingoistic Hindutva agenda is also being financed by borrowed money. In 2020-21, New Delhi would be spending a mammoth amount of INR 70,82,03 crores on payments of interest, which is almost a fourth of total expenditure of 3,04,22,30 cores. This is not much below $ 100 billion, more than 2.5 times Pakistan’s total spending for the ongoing year. That gives us a glimpse of the India’s indebtedness: Modinomics asserting itself.

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