I will touch base an important ratios in corporate world
Salaries as a Percentage of Operating Expense
The metric of salaries as a percentage of operating expense is calculated as follows:
- Historically, the three industries with the highest median percentage of salaries as a percentage of operating expense were health care services (52%), for-profit services (50%)
- educational services (50%).
- Durable goods manufacturing (22%),
- construction/mining and oil/gas (22%),
- and retail/wholesale trade (18%) had the lowest median percentages of salaries as a percentage of operating expense.
Consider your own data you have given
View attachment 281694
Based on the data above, if i consider just On personnel+O&M+Procurement as operating expenses (for simplification) then in 2007 we were spending On Personnel much lower than average (28% vs 33%) whereas in 2012 its marginally above the average (41 vs 39)
The O&M implies that 2007 (25% vs avg 31%), versus 2012 (15% vs avg 28%) shows Indian defense forces (IAF/IN/IA) equipment's were having less issues as compared to wider belief that Indian defense equipment due to being legacy system are nearly defunct and maintenance heavy. The numbers clearly proves that timely retirement and our main vendors as well as main country of purchase (Russia) has still supplied us with less maintenance equipment. Yes we do have teething issues but you can see how media and lobbyists gunning Indian legacy equipment issues dont show in figures which is reality,
Procurement part showed a slowdown (47% vs 43%) yet above average. As i have pointed before in a different thread, UPA 2 last 2-3 years postponed all capex to get all ratios in order and to ensure that new incoming government suffers in all fronts especially in front of rating agencies like moody or standard & poor which will class as junk rating for failing to control spiraling expenses. It was a classic ploy by P Chidambaram on the instruction of Madam Maino for discrediting the new incoming government the moment they knew due to incumbency and corruption they wont get to make UPA 3. This would have helped them label BJP government as ill equipped and would have enabled them back to power in 2019 elections.
IF i go by banking logic for large manpower intensive organisations, we can maintain the max limit of Personnel expense at 40% and thus it tantamount to healthily maintain 40-45% procurement with O%M at 20-15% respectively, the Indian defence sector should look good in the long term.
IF its still at 40% then over time i see O%M rising to 20-25% (ageing and issues will crop up as now we have diversified to new markets so next decade will see first high cost maintenance before localisation kicking in and a stabilization phase therafter) and then falling back again to 15%-20% During this phase procurement % will fall accordingly.
@Abingdonboy