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Tag Archives | Budget 2016

Budget 2016-What about naval acquisitions?

Navy’s role as an instrument of Indian foreign policy gets a lukewarm treatment with the latest budget

By Guru Aiyar (@guruaiyar)

The budget presented by the Finance Minister Mr Arun Jaitley surprisingly sidestepped one of the most important components—national security. Not a word was mentioned about defence. The Budget estimate for 2016-17 is Rs 2,95,623 Crores excluding defence pensions. An amount of Rs. 82,332 Crores has been set aside for defence pensions. The total allocation is thus an increase of about 10 percent which compares to the previous year on year (YOY) increases. What is of interest is the allocation for capital acquisitions which is Rs. 90,660 crores.

Capital expenditure indicates the money that is spent on acquiring new assets to enhance combat capability. The defence ministry returned 13.5% allocated to capital expenditure in the last fiscal. This is attributable to the procurement procedures as well as delay by the arms suppliers. The ratio of individual service expenditure approximately is as below.

Service             Capital Expenditure (in %)          Revenue Expenditure (in %)

Army                           10                                                                          90

Navy                            40                                                                          60

Air Force                     35                                                                          65

The armed forces’ capital acquisition is based on a Long Term Integrated Perspective Plan (LTIPP) which envisages acquisition over a period of fifteen years from 2012-2027 (from 12th to 14th five year plans). The individual services then have their own Service Capital Acquisition Plan (SCAP) that are based on the five year plans. The yearly plan that is reflected in the budget is the Roll-on Plan (ROP).

Of the three services, navy is the one which is the most visible as an instrument of foreign policy. It derives this ability from being the most mobile and deployable in any part of the globe when national interests require it to do so. To maintain combat capability, the desirable equipment profile of the armed forces as per defence secretary’s testimony to parliamentary standing committee is 30:40:30 (30 per cent state of the art, 40 per cent current, and 30 per cent nearing obsolescence), the present profile is 15:45:40. As a result, the combat edge is consistently getting weakened.The main reasons for emasculated acquisition budget is the ballooning salaries and pension bill.

The most significantly affected on the acquisition matrix of the navy are the Project 15B destroyers, Project 17A frigates and the two indigenous aircraft carriers which are the fulcrum of the navy’s capability. Another cause for worry is the delay in Light Combat Aircraft (LCA) and the Medium Range Reconnaissance Aircraft. According to the latest Defence Procurement Procedure 2016 unveiled by the defence minister, one of the main initiatives to overcome the foreign dependence is the Indigenous Design Development and Manufacturing (IDDM). This would ensure a viable military-industrial complex with spin offs for the civilian sector. At present, is better to be circumspect than sanguine about our acquisition policy.

Guru Aiyar is a Research Scholar with the Takshashila Institution.

Featured Image: Aircraft Carrier by Steven Weng, licensed from creativecommons.org

 

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Budget 2016 – Higher education remains in focus

In this year’s union budget, the Finance Minister (FM) announced an increase of 7.1% in the allocation towards education. Overall, Rs 72,394 crore have been allocated in 2016-17 for education, as against Rs 67,585.5 crore in the revised estimate of 2015-16. The revised budget for 2015-16 reduced the overall education allocation to Rs 67,585.5 crore from Rs 69,074.76 crore as was pegged in the budget estimate.

Out of the total outlay of Rs 72,394 crore, Rs 43,554 crore has been earmarked for school education and literacy and Rs 28,840 crore for higher education. While school education saw an increase of 2.4%, higher education sector received a raise of 14.4% in the planned outlay as compared to the last year. This is indicative of central government’s focus on higher education in comparison with school education. In fact, the preference for higher education is also substantiated by the fact that while the demand for grants by the department of higher education has been met with matching budget allocation for two consecutive years, there has been a shortfall of roughly 20,000 crore in the case of elementary education.

Higher Education Budget Trends

Indeed, Mr. Jaitley announced the setting up of a Higher Education Financing Agency (HEFA) with an initial capital base of Rs 1,000 crore. He stated that the aim of HEFA is to finance improvement in infrastructure in top institutions. While HEFA is much needed and could go towards supporting better research and development infrastructure, details on it are missing from the budget documents and it is not clear yet to which institutions this money will be allocated.

As noted by the FM, HEFA will be set up as a not-for-profit and could leverage CSR funds. It is interesting to see how the Government defines the agenda for CSR funds for its own schemes and initiatives, whether it is the Swachha Bharat mission or now the HEFA.

The FM also said that, “an enabling regulatory architecture will be provided to ten public and ten private institutions to emerge as world-class Teaching and Research Institutions”. To give teeth to its commitment of promoting research, the government has also pegged Rs 236 crore under a new sub-heading research and innovation with announcement of schemes such as “IMPRINT” “Unnat Bharat Abhiyan” and “Uchhatar Avishkar Abhiyan”. However, it is interesting to note that barring Rs 10 crore for Unnat Bharat Abhiyan, which is aimed at identifying development challenges in rural India and coming up with sustainable solutions, the remaining Rs 226 crore is directed towards research and innovation in technology and engineering related challenges. Importance given to research in social sciences is thus trumped by that set for natural sciences.

Nidhi Gupta is a Programme Manager at the Takshashila Institution and tweets at @nidhi1902

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Budget 2016-17: Are we on the right track on the education front?

by Kaushiki Sanyal (@kaushu)

The 2016-17 Union Budget has allocated Rs 72,394 crore compared to Rs 68,963 crore for last year, which is about 4.9% increase in the education budget. About 4% of the total budget and 0.5% of the GDP is allocated for education. This is a far cry from the 6% of GDP that had been recommended by the education commission set up in 1966 under the chairmanship of D.S. Kothari. We allocate less than not only developed nations such as the U.S. (5.2%), U.K. (5.8%), Japan (3.8%) and Australia (4.9%), we lag behind Brazil (6.3%), Ghana (8.1%), Indonesia (3.6%) and Pakistan (2.5%).

In the last year’s budget, Rs 42,219 crore and Rs 26,855 crore were allocated for school sector and higher education sector, respectively. In this budget, Rs 43,554 crore (approx 3 per cent increase) is allocated for school education and Rs 28,840 crore (approx 7.3 per cent increase) is allocated for higher education.

While there is slight increase in allocation in absolute terms, the budgetary allocation relative to the total budget and GDP have not changed.

Numbers are only one aspect of the budget and does not tell the whole story.

The new proposals in the Budget regarding education are as follows:

  • Focus on the quality of education: This is to be achieved by (a) increasing the share of allocation under Sarva Shiksha Abhiyan for this; and (b) 62 new Navodaya Vidyalayas will be opened in the remaining uncovered districts over the next two years.

    There is little to criticize these points given the motherhood and apple pie nature of the proposals. But the devil lies in the detail. Pratham’s ASER has been crying itself hoarse every year (since 2005) pointing out the low levels of learning outcomes without much dent in the policies. Would this government take heed and put in place measures to ensure better learning outcomes as well as a regular monitoring system for measuring learning outcomes? A key factor in enhancing quality of education is the quality of teachers. What steps does the government plan to take to provide good quality training for teachers? As suggested by the Seventh Pay Commission, would the increase in pay of teachers be linked with their performance?

  • Make higher educational institutions world class: Ten public and ten private institutions shall be given an enabling regulatory architecture to emerge as world-class teaching and research Institutions. This will enhance affordable access to high quality education for ordinary Indians. A detailed scheme will be formulated.

    The first question that comes to mind – is this too little, too late? At last count, we have 757 universities, 38,056 colleges and 11,922 institutes in the country. Why only 20 institutions should be provided with an enabling regulatory environment? Shouldn’t all educational institutions be provided that? Also, on what basis would these institutes be chosen?

    Second, given that we have the dual challenge of low Gross Enrolment Ratio (GER) in higher education (23.6%) and many graduates who are unemployable, this seems grossly inadequate as a measure. How do we address the skill-gap problem adequately?

    Third, the nature of the enabling regulatory architecture will be the key to changes in the quality of the institute. Would it allow institutes to hire world class faculty at market salaries? Would it allow institutes to set student fees? What would be the governing structure of these institutes? How would faculty be evaluated? These are key questions that need to be pondered over while framing the policy.

  • Set up a Higher Education Financing Agency (HEFA): HEFA would be set up with an initial capital base of Rs1,000 crores and it would be not-for-profit organization. It would leverage funds from the market and supplement them with donations and CSR funds. These funds will be used to finance improvement in infrastructure in India’s top institutions and will be serviced through internal accruals.

    This is a good idea but it is not clear why the focus is on improving the infrastructure in India’s top institutions. The condition of our state universities where most students attend is abysmal. Instead of focusing only on improving the quality of top universities and institutes, it would make far more overall difference in the quality of education if the government also makes an effort to enhance the infrastructure of state universities.

  • Digital Depository for Certificates: The government proposed to establish a Digital Depository for school leaving certificates, college degrees, academic awards and mark sheets, on the pattern of a Securities Depository. This will help validate their authenticity, safe storage and easy retrieval.

    The National Academic Depository Bill, 2011 was introduced in the Lok Sabha on September 5, 2011 but it had lapsed after the dissolution of the Lok Sabha. The Bill had sought to create an electronic depository to maintain database of academic records. If the Modi government can enact this law, it will be a step in the right direction since it will help in detecting fake degrees and mark sheets.

    This lapsed Bill had been referred to the standing committee on HRD which had made some interesting suggestions. At that time, the government was planning to give this task to security depositories. It had even commissioned two pilot studies to check the viability of security depositories undertaking this task. The new government should check these evaluations before taking a decision on who would create the database. The standing committee had also suggested that awards given by foreign boards and professional awards should also be included. Other recommendations pertained to recruitment and training of agents of the depository, the time-limit of the verification process and the adjudication of the offences under the Bill.

What should have included?
To my mind, the government yet again missed the boat on secondary education. This is the crucial link between elementary and higher education in India’s education system. Focused attention needs to be paid to this part of school education to ensure that students are well-equipped to tackle higher education.

Instead of regulating fees in private institutes (and for that matter government institutes), the government needs to provide for easy and low interest (or interest-free) student loans and a large number of scholarships for meritorious students. This would ensure that higher educational institutes are financially viable while ensuring there is equity.

Kaushiki Sanyal is an Independent Policy Consultant. She tweets @kaushu

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