Guns v/s Butter
This post has been authored by Indu Dahiya, the Research Analyst Intern at Arthashastra Intelligence
Defense spending and Imports
With Russia invading Ukraine followed by sanctions imposed on Russia by many countries including the USA and European Union, India’s armed imports are predicted to suffer. Russia is the largest exporter of armed transfers to India. Between 2000 and 2020, Russia accounted for 66.5 percent of India’s arms imports. Of the $53.85 billion worth of weaponry imported by India during this period, $35.82 billion was from Russia. These imports included everything from nuclear submarines and aircraft carriers to tanks, guns, fighter jets, and missiles.
In the budget of 2022-223, the finance minister announced a defense budget of INR5.25 trillion (USD70.2 billion) which increased 10% over the initial allocation in 2021–22. And this is equal to about 13% of the government\’s total expenditure for the year.
Budgetary allocation for the Ministry of Defence
| 2019-20 | 2020-21 | 2021-22 | 2022-23 |
Defence services (Revenue) | 2,23,240.83 | 2,24,351.76 | 2,38,717.09 | 2,39,743.71 |
Capital outlay | 1,11,092 | 1,34,304.92 | 1,38,850.90 | 1,52,369.61 |
Defence pensions | 1,17,810 | 1,28,065.88 | 1,16,878 | 1,19,696 |
Source: Ministry of Finance, all figures in INR crore
Guns v/s Butter
There is a trade-off when it comes to defence spending or any spending for that matter since we have limited resources. Development, peace and defence and political economists have extensively investigated the existence of a trade-off between military, education and health spending since the 1970s. These studies show that defence spending is crowding out investment in these activities which have a good multiplier effect in a country. And for developing countries like India, it is said that enhancing the quality of its citizens is a priority. Last year, defence accounted for 15.5 per cent of India’s budget whereas welfare spending like food subsidies accounted for 6.6 per cent, rural development was 4.3 per cent, health was 2.4 per cent and education was less than 2 per cent.
The coronavirus hitting countries majorly in 2020 and still impacting citizens along with the economy of the countries has made this an even more prominent issue today. Today, more people are in poverty, more children are deprived of basic education, households are lacking basic facilities, the country is suffering from low GDP growth, and more debt is piling up on the country. This debt will contribute to even more interest payments piling for India, more interest and debt payment means fewer finances for other activities and thus these problems will become more prominent. Now the question arises if a country should spend on defence in times like these. Although we can see in the data from World Bank that defence spending as percentage of GDP is decreasing.
But on the other hand, with the elevating geopolitical tensions and other countries particularly India’s rivals investing hugely in defence, this debate is hard to go any time soon. Even Pakistan’s armed forces are technologically superior to India’s and China on the other hand spends four times that of India.
Self-Reliance
In the graph above we can see, there is a drop in imports of armed forces, this is because of India’s mission of self-reliance. In August 2020, the government of India imposed a ban on 101 products from foreign players followed by the release of a positive indigenization list of 108 items that could only be procured from domestic manufacturers thus reducing dependence on foreign players. Under Atmanirbhar Bharat, India spent 64% on indigenous options, and the target is 68% for FY 2022-23. But there is a concern that the equipment will suffer from bad quality and hence won’t be reliable.
Although India’s imports in weaponry are decreasing, the dependence on Russia is still very evident, which can harm the country in its need, and thus solutions need to be found. Along with the indignity, India should find other providers of armed transfers.