Nature, Quantum & Components of Defence Expenditure and Defence Pensions

IDSA was tasked by the 7th Central Pay Commission in July 2014 to conduct a study on the “Nature, Quantum & Components of Defence Expenditure and Defence Pensions”. The Terms of Reference (TORs) required IDSA to:

• Analyse the nature, quantum and components of Defence Expenditure from 1995-96 to 2013-14 with a specific focus on salary versus non-salary component. How this compares with similarly placed counties may also be analysed in detail.
• Further, in this non-salary component, the expenditure on modernisation of armed forces and upgradation may separately be highlighted.
• The impact of the implementation of the Fifth and Sixth Pay Commissions’ recommendations on the pattern and composition of defence expenditure, time frame in which the additional expenditure on salaries and emoluments, in relative terms, was absorbed.
• Analyse the quantum and components of expenditure on defence pension from 1995-96 to 2013-14. How this compares with similarly placed counties may also be focused upon.
• The manner in which defence pensioners’ liabilities are financed in similarly placed countries may be focused upon.
• Compare the salary structure of personnel in the Indian Defence Forces with those in similarly placed countries, preferably in purchasing power parity (PPP) terms.
• Analyse the relationship of Defence Expenditure with the Central Government Expenditure and the GDP from 1995-96 to 2013-14.
• Analyse the Defence Expenditure of the neighbouring countries from 1995-96 to 2013-14.

The above terms of reference were covered under three main chapters of the report, viz., Defence Expenditure, Pensions, and Pay and Allowances, based on primary data sources available in public domain. The Introduction covers the methodology and the basis of selection of countries for the comparative study. Post a presentation of the study to the 7th CPC in February 2015, some additional points were raised and these are addressed in Chapter 5. The study team comprised of: Mr. Vinod Misra, Mr. Amit Cowshish, Gp. Capt. (retd.) Vinay Kaushal, and Mr. Laxman Behera.

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