The world is still in grip of COVID19 pandemic. Some vaccines are being tested but so far none of them has passed safety tests.
The lockdowns have played havoc with economies, the world over. The ugly West has allocated trillions of dollars for economic welfare of the impoverished people. But, India allocated paltry US$25 billion by way of welfare. Some economists have predicted recession, and even collapse of Chinese and Indian economies. Regrettably, Indian chief of defence staff has threatened that military option was on the table if talks with China fail.
India’s rising military expenditure and purchases: The Indian military doesn’t seem to know there’s a pandemic. India’s 2020-21 Budget envisages a total outlay of Rs 30, 42,230 crore. Out of this, Rs 3, 37,553 crore has been allocated for military (excluding military pensions). For military pensions, Rs. 1, 33,825 crore has been provided in Budget Estimates 2020-21. There is an increase of Rs 40,367.21 crore in the total military allocations (Rs 4, 71,378 crore) over 2019-20.
The total military budget accounts for 15.49 percent of total expenditure for 2020-21. The allocation represents a growth of 9.37 per cent over Budget Estimates for 2019-20. Out of Rs 3, 37,553 crore allocated for 2020-21, Rs 2, 18,998 crore is for net revenue expenditure and Rs 1, 18,555 crore is for capital expenditure, which includes modernization-related expenditure.
The ‘transparent’ military expenditure shows an increase of only 9.37 per cent. But, if we add to it concealed provisions the increase would balloon manifold. The concealed provisions include quasi-defence allocations like border and strategic roads, nuclear/space research, paramilitary forces like Border Security Force, Central Reserve Police Force, and so on. Besides there are public sector undertakings like dockyards, machine tool industries and Bharat Heavy Electrical Limited.
Then, India unnoticeably increases her defence expenditure under Revised and Actual budget estimates. But the real expenditure in past years has been much greater than that shown. Previously, India increased its military outlays in revised and then actual estimates. Thus the actual military expenditure is much higher than the initial estimates, which are quoted in international media under a hypnotic spell.
India does so to `lower’ its military budget as proportion of GNP. Thus India, as compared with its neighbours, gets a favourable image in The Military Balance, Jane’s Defense, and other international magazines.
Colossal expenditure on conventional weapons by a nuclear power is not understood. Nuclear deterrence does not mean matching bomb for bomb. Nuclear victory would at best be pyrrhic. Heretofore is a bird’s-eye view of her shopping itinerary. Procurement of 36 Rafales and 12 Su-30 MKI aircraft and 21 MiG-29. Upgrading Indian Air Force’s existing MiG-29 aircraft. The MiG-29 procurement and upgradation from Russia will cost Rs. 7,418 crores. Producing the Su-30 MKI at the Hindustan Aeronautics Limited will cost Rs. 10,730 crores.
India’s `Defence Acquisition Council approved a collection of arms procurement projects worth $5.55 billion, including domestic efforts worth $.4.44 billion’. The inventory includes Pinaka multi-barrel rocket launchers, upgrading BMP-2 infantry combat vehicles; software-defined radios; Nirbhay land-attack cruise missiles, Astra beyond-visual-range missiles, Excalibur artillery rounds for M777 ultralight howitzers (US), Igla-S air defense systems (Russia), Spike anti-tank guided missiles (Israel), 100 modified K-9 Vajra 155 mm/52 caliber self-propelled tracked howitzers (South Korea), S-400 Missile Air Defense System (Russia), and Rafale fighter jets (France).
In contrast with military spending, India earmarked a meager $25 billion in corona virus relief measures (India’s miserly response a path to viral collapse, Asia Times May 5, 2020).
Misconception: India’s rising military expenditure is based on a misconception of national security. National security, from the point of view of an economist, depends on three factors: (a) The quantity of national resources available, now and in future, (b) The proportion of these resources allocated to national security purposes, and (c) The efficiency with which the resources so allocated are used.
Resources are always limited vis-à-vis unlimited wants. As such, the problem of defence allocations should, in effect, be a problem of constrained resource optimization, not blind allocation of resources.
Let India lower her expenditure. Pakistan will follow suit. As a result of India’s rising military expenditures, Pakistan also increases its defence expenditure despite meager resources.
Indian policy of increasing her defence outlays is based on strategic misconceptions. India visualised it would be suicidal for Pakistan to increase her defence budget pari passu with India’s budget. In any case, Pakistan could not afford to spend more than half the increase in India’s defence budget. A higher allocation would sap Pakistan’s resource potential for sustained growth in future.
India thinks Pakistan had to choose between Scylla and Charybdis that is economic collapse or defence preparations (same quandary as of former USSR). However, India’s perceptions proved to be wrong. Pakistan has neutralised the impact of this differential economic performance by, going nuclear. If Pakistan weakens its defence by slashing its defence expenditure, will India guarantee that it will not attack Pakistan or go for a quasi-attack (Operation Parakram(valour) costing Rs 74 crore).
Impending collapse: India is heading for a recession, widespread unemployment, fall in growth rate, and fall in purchasing power and demand, industrial production, and so on. India’s leading companies are suffering losses. The central government’s fiscal deficit will rise to about 5.1per cent of Gross Domestic Product in fiscal 2021, with considerable upside risk depending on the quantum of forthcoming fiscal support,
The options for printing more money, imposing new taxes, selling bonds to locals, and raising money from non-resident Indians (NRIs) are all also limited.
Falling GDP, collapsing wholesale prices: Is Indian economy heading to its worst show in September quarter since 2008 global financial crisis?
There is no major crisis situation right now globally and the current slowdown is on account of the failure of the country’s clogged domestic growth.
Most international agencies including Moody’s have lowered their GDP growth forecasts for India. India is entering the sub-five percent GDP growth range after a gap of 42 quarters? If the predictions of State Bank of India (SBI) economists offer any clue, second-quarter Gross Domestic Product (GDP) will come at 4.2 percent. That’s the lowest quarterly growth in 30 quarters ever since the new series, with 2011-12 base. In the fourth quarter of FY13, the GDP growth had fallen to 4.3 percent. If one looks at the old series (2004-05 base), this will be the lowest quarterly growth in at least 42 quarters. In the fourth quarter of FY09, growth had fallen to 3.5 percent.
Indian economy had a shocker when the GDP growth slowed to a 6-year low of 5 percent in the April-June quarter. Even after that, there is no recovery in sight. Production figures have been flashing negative signals. The manufacturing sector has been on a decline spree. The wholesale price index (WPI) fell to a 39-month low of 0.3 percent in September on account of a continuing deflation in fuel and power components and manufactured products.
The Index of Industrial Production (IIP), a key barometer of economic activity, contracted for the second straight month in September by 4.3 percent. In August, the factory output had contracted by 1.4 percent (revised estimates).
The former finance minister told Rajya Sabha ` India’s economy about to collapse, attended by ‘incompetent doctors’.Even following successful companies are running in losses: Vodafone, Airtel, India Post, GMR Infra, Yes Bank, Union Bank, PNB Bank, Axisa Bank, JP Group, Viddeocon, Aircel, Tata Docomo, Jet Airways, Heritage Renting, BSNL, and Auto Industry, including Maruti.
Effect on China: Economists have predicted recession of C hina’s economy also because of the pandemic. But, the impact would be less severe than on India. China’s Achillese heel is its non-inclusive , authoritarian institutions, lack of innovation, and debt rfeliance. But, a contrary opinion is that it’s certainly true that China will tide over its difficulties through sense of dynamism, forward-looking optimism, and ingenuity of. `Chinese workers and Chinese entrepreneurs. For instance, People’s Bank of China has been very innovative during the last fifteen years.
Inference: Rising military expenditure could precipitate collapse of Indian economy.