by Ravi Rikhye
The sum of all this
The MEA whispers in one ear of the PM that the militaristic, warmongering military is working to wreck the MEA’s peaceful efforts to enhance India’s national security, and the MoF whispers in the other ear “This extreme spending on defense will torpedo your development agenda.” The Prime Minister is thinking of the next election and votes, which means more money spent on what are essentially bribes. It becomes easy for him to veto the northern border expansion. At no point does it strike anyone that India’s defense spending is a bare 1.56% of GDP at a time we face mortal enemies on two fronts, with one enemy, China, determined to control the seas around us as well, that defense expenditure is much too low.
Last, keep in mind that the Indian Prime Minister was scheduled to visit China on September 3, 2017. China ended the Doklam confrontation on August 29. We will see why this is significant.
3.8 A strong defense requires a strong economy
While this thesis is a military analysis, please always keep in mind that economic power is the foundation of military power. The Government of India simply has no interest in a strong defense, born out of a signal ignorance of India’s deteriorating security situation. For the 2018-19 budget, the Finance Minister struck a low blow by declaring if he provided the money the defense services wanted, he would have to go into deficit.[43] Well, how about cutting the huge allocations for political spending intended to bolster the ruling party’s chances in the 2019 elections? According to Government sources, income plus deficit spending was $473-billion in 2019-20 and $445-billion in 2017-2018.[44] How is the GOI was unable to give defense $10-billion more for equipment, thus starting to make up for the reductions of the last 27-28 years?
A most clear-cut case of how vital the economy is for national security, consider our former colonial master, Great Britain. In 1914, it had direct control or dominion over 25% of the world’s surface, and the most powerful navy in the world. A mere 45-years later, Britain was finished. The culprit? Its economic decline. This started perhaps in 1890. As the world’s first industrial power, the nation sat on its laurels and failed to modernize its industry while Germany and the United States shot ahead. It entered World War II in a parlous state.[45] By April 1941 it came to end of its foreign exchange reserves and was having to sell its stake in American companies. Had the US not stepped in with $27-billion worth of Lend-Lease assistance – today equal to $4-trillion in terms of UK GDP, Great Britain would have been defeated. If you have time, I suggest two other books by Correlli Barnett which further make the point that without economic power Britain was finished as a great power.[46],[47] In his description of the functioning of British bureaucracy 1930-1950, you will see almost exact parallels to the ways in which our bureaucracy works even today. And you will see exact parallels between our public sector enterprises and how British factories, management, and R&D worked 1939-45. The three books together make up Barnett’s The Pride and the Fall trilogy.
When the Soviet Union collapsed in 1989, it was not because of war, but because its vast armed might hid the reality that its GDP could no longer pay for its empire. Today Russia has a smaller GDP than India.
[Calculating the ruble defense expenditure for 1989 compared to the US dollar is an unenlightening exercise for this analysis. Still, at the official rate of 1 ruble equals USD 1.7, In 1989 the USSR was spending USD 131-billion to US’s $310-billion.[48] At the tourist rate, however, USSR was spending just $13.3-billion. In 1991, when Russia devalued, the 1989 budget would have been ~$3-billion.[49] In 2018, Russia’s defense budget is $46-billion, about equal to India’s; versus $700-billion for the US. In terms of GDP, it is 2.8%, showing Russian GDP is less than India’s.[50] China is spending almost 4x Russia’s budget and about 1/4th US spending. I am aware a dollar comparison tells only a partial truth; nonetheless, it suffices for our purposes.]
Our military inadequacies today come from a refusal to spend on defense, not the lack of GDP. Against the 3.5% of the 1960s, 1970s, and 1980s, we spend 1.6%. At the higher percentage, in terms of our expected 2019 GDP, we should spend over $105-billion on defense. Very roughly, that could mean $65-billion plus annually for equipment, which would resolve that major and crippling problem. Nonetheless, today China spends 1.3% of GDP on defense and at about $175-billion+, has the world’s second-largest expenditure, plus about the same amount on international security. At 3.5%, it could have a $400-billion defense budget, swamping our hypothetical budget by four-to-one. So, if we are to resist China, we must step up our economic growth to a sustained 10% annually for 15-years, then 8% annually for the next fifteen. That will give us a $40 trillion GDP by 2050. Depending on the growth rate you want to assign to China – 6% for ten-years, 5% for the next ten, and 4% for the last ten is probably reasonable, giving $44-trillion by 2050 – we would be comparable to China. Mind you that would still be less than half of today’s US per capita of ~$55,000.
There is no intent to argue specifics of growth rates and obstacles thereof. That is a complicated matter. For example, no one yet knows what increasing robotization of the economy will do to jobs. Its only needs noting that between 1980, when China began its growth spurt, to 2014, a total of 34-years, China averaged 9.8% growth.[51] So there is nothing unrealistic about assuming India can grow at 10% for the next 30-years. It requires no great intelligence on our part, only a rigid adherence to the mantra “Don’t Do Stupid.” All that is needed is for Government of India (GOI) to get out of the way, accept there will be winners and losers, establish a Universal Guaranteed Income by getting rid of the hodge-podge of assistance to the poor schemes, thus helping those who are losers or who cannot participate in the next economic revolution. The GOI’s role should be to spend heavily on nutrition, clean water, health, and education – all of which is simple provided special interests are ignored, and a fair tax rate for everyone established. We cannot afford, for example, to tax the agricultural sector at a rate of zero, considering it accounts for 17% of GDP.[52] Nor can we afford to keep providing large subsides to the agricultural sector.[53] In the United States, the individual zero tax threshold is $10,000, or about 1/6th of per capita. The first tax bracket is 10%. In India, very approximately, no person pays tax on income twice per capita, and the first tax rate is 5%. Estimating the cost of corruption is a difficult exercise. Nonetheless, one study estimates the black economy rose from 9% in 1960-61 to 23% in 1997-1998[54]. In 2019-2020 when Indian GDP should be $3-trillion and assuming the government can tax 20% of GDP, that implies a loss of $150-billion to the exchequer.
If readers are interested, the World Bank[55] has a 2018 press release on what India needs for a sustained 8% annual GDP growth. The required changes are so small that we must conclude the GOI is not serious about advancing our country.
These are not prescriptions, merely random points to show that rapid economic growth requires inputs. It is also true that for all the Indian corruption and favoritism, India is not China. We have the rule of law and can’t just seize someone’s property for nominal compensation to build a road. Nor can a minister’s son tell an Indian bank to “loan” him huge sums of money and then expect a write-off. Nonetheless, while an Indian company cannot grab land, why cannot it pay a fair market price? Tata Nano abandoned Bengal because land-owners were agitating against the appropriation of their land by the Bengal government at low rates. But then Tata went to Gujarat,[56] the Government paid market rates of Rs 4.3-million per acre versus Bengal’s Rs 750,000 to Rs 1.15-million[57], that too a 5x increase over earlier offers which were rejected and got on with their business. Why was not the same thing done in West Bengal?[58]
The General Sales Tax was an excellent step toward increasing tax revenue. So was demonetization, which forced many evaders into the tax net and the banking system. Naturally, since the Government is composed of blithering, incoherent idiots, this was mucked up in ways a half-intelligent 1st-year management student could have avoided. Whose idea was it to make the new currency notes different siz
ed from the old, messing up the ATMs and leaving people without cash? Whose idea was it to fail to arrange ample supplies of new notes at all banks? Whose idea was it to keep changing the amount of money that could be withdrawn at one time? I once asked a Reserve Bank of India why our notes came in different sizes. It was because of the large number of illiterate people, he explained, that we could not have same-sized bills as in the US. Fair enough. But has RBI noticed all Euro bills are the same size but of a different color? That reduces the danger of mixups. And why the Rs 2,000 note, which allows black money folks to store twice the value in the same physical space? In the US $100 is the maximum value bill; previous they went to $100,000, which was generally used for interbank transactions. Incidentally, people like to have physical currency instead of virtual currency. But given how much convertible currency is used for global illegal transactions, what people like or not is irrelevant. Why has the GOI not knocked off at least one zero from our money, simplifying cash transactions? When I was a child, my grandmother would give me one pice (1/64th of a rupee) to hand over to the first beggar we saw – a habit I still retain, even though one dollar is, for me, too much to just give away. Anyway, one pice sufficed for the beggar to thank you. One-day grandmother gave me an anna coin. I got at least one minute of thanks and prayers for that. What does one paisa buy today? Nothing. It should be knocked out. Indeed, today anything less than 50-paise coin has been demonetized. There is a case for a new 1 paisa coin to equal 50-paisa. The conversion by 50 instead of by 10 is, however, a bit complicated. De Gaulle of France knocked two zeroes off the French Franc, so that instead of 500 FF = 1 USD, it became 5 FF = 1 USD.[59] He did it because he thought it was undignified for France to have such a cheap value franc. Has anyone in India thought about Bharat Mata’s dignity? I realize this proposal will seem laughably trivial to many. Here’s the thing: symbols matter. We are building a new India. Our rupee was set at Rs. 4.76 = 1USD in 1949. At Independence the exchange rate was ~INR 3.3 = USD1, then 7.5 in 1966, and now it is 64. It's undignified. It demeans our money in subtle ways. This must stop because we must start thinking of ourselves as a people that matter, not a banana republic.
4. Background to The Two Front War Problem
4.1 The “Just Enough” Flaw in Pakistan-front planning
4.2 A hypothetical war-winning plan against Pakistan
4.3 The Schlieffen Plan: the reality of a 2-front plan
4.4 The Law of Unintended Consequences
4.5 The Chinese threat
4.1 The “Just Enough” Flaw in Pakistan-front planning Indian defense planning
From the start of independent India, GOI has sanctioned for the Pakistan front only just enough divisions for defense. This might make sense if like Pakistan we were economically weaker than our adversary. Instead, ours has always been the much larger economy. Perhaps 4 to 5 times bigger at the start, now 10-times bigger. Equality might still be acceptable were there no serious issues. Except since 1947 Kashmir has been an issue over which four conventional wares have been fought, and a 30-year insurgency continues. Until the 1962 China War, Nehru had a definite anti-army bias. This because the British-Indian Army was freely used for oppression. Doubtless, the almost non-stop army coups that afflicted the 3rd World and Pakistan led him to fear the Indian Army. There was also his Fabian socialist conviction that defense detracted from development. This is true after a certain level of defense spending measured as a percentage of GDP; yet it’s easy to overlook that without security as the first principle of nationhood, a country cannot progress. There was the constant worry about a shortage of foreign exchange, yet Nehru had no difficulty sanctioning an air force and navy three-times bigger than Pakistan’s, and these services were big consumers of sterling. In the absence of primary documents or at least secondary ones, it is difficult to prove the reason to keep the Army at equality with Pakistan. One factor that almost certainly played into this was the Army own lack of self-confidence that stopped it from standing up to Nehru. Reviled from Day 1 as a colonial left-over, combined with the complete disdain Nehru had for his generals, destroyed their pride.
Nonetheless, while “just enough” might have been the operating paradigm for the Army in the west, when Nehru realized he had messed up on the northern front, he had no hesitation in giving the army what it wanted. By the late 1950s, the army assessed it needed six divisions for the north. It was given one when the new 17th Division replaced 4th Division in Punjab, and the latter went to the Northeast. As tension built up through 1962, GOI did sanction three more divisions, 2nd, 3rd (for Ladakh) and 8th. I do not know when the sanction was given, but it many have been only in September or even after the outbreak of war on 21/22 October. For effectiveness, the divisions should have started forming in 1959. As it was, they were filled out with existing battalions and brigades, and not by adding to net strength. Yet, when the Army asked for 12 divisions after the start of war, GOI agreed to eleven.
In retrospect, this was more than required. Six divisions, as per the Army’s 1959 assessment, would have sufficed nicely under the “just enough” paradigm. That eleven were cleared is no criticism of GOI. Those who did not live through those dark days cannot appreciate how panicked the nation was, how much anger was directed at GOI for refusal to prepare before trying conclusions with the Chinese, and how cowed Nehru was for failing the country.
Hypothetical Deployment 1962 with 6 new divisions shown in italics
Pakistan front
1A, 7, 15, 19, 25, 26, 9 [in Punjab reserve]
Ladakh
3
Sikkim
17, 27
Tawang
4, 5
Walong
2
Reserve
8, + [20, 23, already in East]
The six new divisions in italics might have been 2, 3, 7, 8, 9, and 15. The would have allowed seven divisions in the west, enough to defend against Pakistan. East Pakistan would be left uncovered because Pakistan would not risk any offensive action here. Nine divisions would have been available against China. The raising orders would have had to be given in early 1959 so that all could be effective 42-months later. Would China not have reacted by sending more divisions to Tibet? Possibly, but the results would likely have been uncertain. AT the very least, China would have had no walkover. For example, the above deployment would have permitted:
Ladakh 3 Division, brigades north of the Changchemo, at Chusul, at Dungti/Demchok, with a reserve brigade at Leh. (Total 16 battalions, Army had asked for four “strong” brigades)
Himachal: one brigade
Middle Sector: 9 Brigade
Sikkim: 17 Division with 27 Division in reserve
Tawang: two of 4 Division’s brigades at Namka Chu (6 bns); Poshing La (2) bn; reserve bde at Tawang (4 bns) (this is hypothetical because we should not have been defending on the river but up on the ridge); 5 Division at Bomdila, Sela, and reserve
Walong: 2 Division with brigades at Kithboo, Walong, and one in reserve
Eastern Command reserve 20 and 23 Divisions
In case of extreme emergency 9 Division could have been sent to the east without compromising the Pakistan front defense or sent to Ladakh to join 3 Division in an offensive. This assumes that roads and airfields were also built, more Mi-4 medium and Sikorsky light helicopters purchased, proper winter clothing and accommodation, cold weather radios, fortifications, replacement of the 0.303 with at least the FN 7.62mm and with the same caliber for LMGs, air-cooled MMGs at 8 per battalion, not four, 8 x 81mm mortars not six 3”, and 90mm recoilless rifles. With 24 artillery guns per brigade plus 107mm heavy mortar batteries, this force could have held off 15+ Chinese divisions. Of course, this is all a fantasy, but we need to appreciate it was possible. Defense expenditure would have gone to 2.8% of GDP, still low in the bigger scheme of things. A lot can be done in terms of infrastructure in 3-years on a war footing, but not if we sit around thinking we have a hundred years to build.
The point is only that wi
th China not only did GOI go for the maximum option, it also sanctioned four more divisions against Pakistan, on the expectation that with India adding so many new mountain divisions, Pakistan was also bound to raise more troops in the west. For the first and only time in our independent history did we anticipate the adversary, rather than lagging him.
Indian and Pakistan division raisings 1947-2015, western front
Year
India divisions Pakistan front
Total
Pakistan divisions
Total
1947
1 Armored, 4 and 5
3
None
0
1948
19, 20, 25, 26
7
6, 7, 8, 9, 10, 12 , 14
7
1960
17, 27 [plus 4, 5 went East 1962]
9
1A [6, 9 disbanded], 15
7
1965
10, 11, 12, 14, 15
11
6 A, 11
9
1971
36, 54
13
9, 16, 17, 18, 23, 33
15
1972
16, 18, 31A [9 came west]
17
9, 14, 16 [a], 19, 35, 37, FCNA
19
1978
22, 24
19
None
1986
33A, 28, 29
22
40, 41
20
2018
None [8 Mtn shifted west]