GDP and Defence Expenditure in India

24 Jan, 2000    ·   311

Wg. Cdr. N. K. Pant makes for higher budgetary allocation for defence

The annual budgetary exercise is full swing these days. The defence minister George Fernandes has  advocated raising defence allocations from 2.3 to 3 per cent of gross domestic product (GDP). The term signifies the total value of goods and services produced in a country in a given year and is the most commonly used measurement of the wealth of a nation. But the GDP has its limitations since some economists do not consider it as a realistic indicator of economic development. 



The growth of GDP in India has been encouraging in the early Nineties and with the agricultural output  particularly making a significant contribution with the industrial sector not lagging far behind, the elusive figures touched a peak of 7.8 in 1994. But it subsequently dipped to 5.1 per cent in the revised estimates for 1997-98 due to negative contribution of the agricultural sector. The statisticians have now forecast a growth rate of 7 per cent for India ’s GDP in 2000-01 which will be in the range of $1500 billion. If 3 per cent of GDP is to be earmarked for defence as suggested by  defence experts the nation should set aside approximately Rs 65,000 crore per annum for  defence kitty signifying an increase of Rs 15000 crore at the present rates.



Should the annual defence expenditure of a country be subject to  cyclical fluctuations? If the GDP parameters are not considered realistic these theoretical yardsticks cannot not applied for determining the budgetary allocations for defence. The armed forces could be starved of funds in the year when the national GDP index unexpectedly slides down due to poor agricultural output or unsatisfactory industrial performance.



It needs to be borne in mind that Saudi Arabia , United Arab Emirates and Iran are feverishly modernising their defence arsenals. Pakistan tries to keep abreast of India in regard of the arms acquisitions and has intimate military ties with the Gulf countries. A sizeable number of its servicemen work in the military establishments there to run their  sophisticated war machine.. Pakistan is planning to start the commercial production of the high-tech Agosta 90B submarines under licence from France . Saudi Arabia is expected to be one of the potential buyers of these vessels.  Moreover, the Chinese whilst overtly getting into friendship mode with India , are simultaneously bolstering the neighbourly military machines by pumping modern arms and missiles into the region.  



When projected through the theoretical prism of GDP , the Chinese and Pakistani average of annual defence spending is in the range of seven per cent. Looking at the present tottering health of Pakistan ’s economy, the budgetary allocations for defence from its GDP have shown a downward trend but the defence expenditure in real terms has moved upwards due the country’s aggressive military stance. Moreover, it reportedly channels millions of dollars  earned through the illicit drug trade into covert military operations such as  the proxy war in Kashmir and propping up the Taliban regime in Afghanistan . Similarly, China   cannot maintain a three million strong armed forces, presently in the process of modernising and equipped with a formidable force of nuclear warhead tipped missiles by earmarking only seven per cent of its GDP on its  military machine.   



The real hard facts of strategic and tactical threat perceptions  should be the cardinal principles to decide the ultimate strength of the army, navy and air force, along with their respective weapon systems and delivery platforms. Force levels must be tailored to meet the  military threats that may emerge on the nation’s security horizon. Thereupon, adequate funds in rupee terms as well as in foreign exchange should be earmarked to support  a three dimensional striking and defending force without the proverbial sword of Damocles in the form of GDP percentage hanging over the country’s defence spending.