Confronting an unfavorable fiscal picture unlikely to change in the short term, the Indian Navy is shrinking its procurement ambitions as it re-scopes future force goals.

According to senior officials, the Navy’s plan to have 200 warships in service by 2027 is no longer tenable in light of the service’s shrinking portion of the overall defense budget.

Navy Chief Adm. Karambir Singh recently stated that the share of the defense budget allocated to the Navy has steadily declined from 18 percent in 2012 to the current level of 13 percent. This, in turn, has had a knock-on effect for naval capitalization.

The Navy’s long-standing fleet goal of 200 warships is now being pruned to 175 in an effort to optimize available resources. The current inventory amounts to 130 ships, with 50 more in various stages of planning and production.

Forced budget cuts hitting hard, Navy pulls back on procurement of combat systems Cutting down on numbers planned for mine sweepers, early warning choppers & aircraft Foreclosing projects that have hit a dead end Plans cut from 200 to 175 ships by 2027 https://t.co/jrgpTJn6Dc — Manu Pubby (@manupubby) January 16, 2020

Whether funding pressures ultimately have a downstream effect on the Navy’s requirement for three carrier battle groups remains to be seen, but if its goal of fielding three aircraft carriers, with two of indigenous build, is met, there is a strong chance the timeline for doing so will have to be extended.

The Navy currently has one operational aircraft carrier, a 40,000-ton refurbished Soviet-legacy missile cruiser christened INS Vikramaditya, with another indigenous carrier, IAC-1 (INS Vikrant), already built and being readied for basin trials. The 40,000-ton indigenous carrier is expected to become fully operational by 2022.

But India’s aim is for three carriers, thus ensuring two are operationally available at all times. This would allow the service to position a carrier off both the eastern and western seaboard of the country while the third is in refit and maintenance.

The Navy is in the midst of finalizing its requirements for IAC-2, with specifications to include a 65,000-ton carrier featuring Catapult Assisted Takeoff But Arrested Recovery (CATOBAR) capability and full electric propulsion. Once its case is put together, the Navy must receive financial clearance from the Defence Ministry and be granted “Acceptance of Necessity” from the government in order to issue a formal tender.

But progress is slow.

Since 2017, the Ministry of Defence has declined granting financial clearance for the project due to the cost burdens it would impose on future budgets. Thus the Navy’s goal of bringing IAC-2 into service by 2030-2032 appears elusive. If the project is ultimately given the go-ahead, the operational entry date is likely to be pushed further out.

Elsewhere, the Navy’s modernization ambitions have butted up against fiscal reality.

With requests for additional funding of up to INR200 billion ($2.82 billion) for underwriting new acquisitions spurned by the MoD last year, the Navy now is left looking to shrink the scope of its ongoing procurements. Its capital budget earmark for the current fiscal year (2019-2020) involving new projects amounted to INR231.56 billion, or $3.25 billion. While a significant figure, the Navy’s fiscal year obligations on equipment delivered and services already rendered came to INR254.61 billion ($3.58 billion), necessitating deferred payment arrangements.

In short, the Navy is left using today’s budget for yesterday’s purchases – and still unable to pay its bills.

With key projects, including the aforementioned IAC-1 INS Vikrant carrier, Project 15B destroyers, Project 17A frigates, offshore patrol vessels, and Project 75 Kalvari class submarines (of French Scorpene design), currently underway, and others – including 41 ships and 24 multimission MH-60R Romeo Seahawk naval helicopters – granted Acceptance of Necessity status, the looming financial crunch is very real.

The funding pressures mean the Navy has to trim its procurement ambitions whether they be capital ships or force multipliers.

Forthcoming projects involving Mine Counter Measure Vessels (MCMVs) will be reduced from 12 vessels to eight, while already the Navy has been forced to cut its batch order for additional P-8I Poseidon maritime patrol aircraft (MPAs) from 10 units to six. An acquisition of Kamov Ka-31 airborne early warning (AEW) mission helicopters is also shrinking from an original goal of 10 units to six.

Fleet support ships and amphibious capabilities such as landing platform docks (LPDs) are also areas where the Navy is feeling a capacity and capability pinch.

All this is playing out against a backdrop of Chinese inroads into the Indian Ocean Region (IOR), the strategic neighborhood the Indian Navy is aiming to project power throughout with the aid of its blue-water naval buildup. With the reach of China’s People’s Liberation Army Navy (PLAN) growing in the IOR and its shipbuilding and naval modernization efforts continuing at rapid pace, the Indian Navy confronts the prospect of a highly capable peer competitor at its doorstep.

The PLAN currently has some 400 naval ships – more than 330 surface vessels and 66 submarines – at its disposal, with some forecasts estimating a fleet of over 550 naval ships (including 99 submarines) by 2030. Along with its growing ship capacity and strengthening blue water capabilities is an increasingly sustainable operational reach, thanks to a growing web of naval logistics bases cropping up under cover of Beijing’s Belt and Road Initiative (BRI) linking mainland China to Europe.

China’s relationship with India’s strategic rival Pakistan also comes into play. As the two countries have grown closer, so too have their navies, with the PLAN and Pakistan Navy forging closer ties and raising the threat of a dual China-Pakistan axis in the IOR.

While the Indian Navy has its own significant strategic advantages over its Chinese counterpart in the IOR due to geography, it also confronts multiple tasks that strain its capacity. These include protecting the country’s vast 7,500-kilometer coastline, ensuring open sea lines of communication for a nation that receives over 90 percent of its foreign trade volume by sea, and projecting power and conducting naval diplomacy across the eastern and western rims of the Indian Ocean.

With a foreign policy approach predicated on non-alignment, the prospect of seeking support from other nations, whether by bolstering forums such as “The Quad” (consisting of India, Australia, Japan and the United States) or cementing bilateral security pacts, appears a non-starter. This means the Indian Navy will have to carry the brunt of maritime security on its own – and with fewer resources at its disposal than hoped.

Expect optimization of assets to be India’s mantra in the near term as financial pressures force a rethink among naval planners.