Saturday, January 23, 2010

Defense Economics: Guns or Bread in India and Pakistan?

I have just published on my blog, Haq's Musings, a guest post by Colonel Pavan Nair, a retired Indian Army officer, a detailed analysis of the Indian defense spending in the context of the nation's growing needs for social spending on food, education and health care. Col Nair prefaces his analysis by lamenting that "defense economics has not been a subject for serious study or debate in Indian academic or military circles. Little or no literature is available with the exception of a few books in the area of defense accounts. Economists and activists have long argued that defense related expenditure needs to be curtailed. Opinion is clearly divided between the developmental lobby and strategic thinkers who wield influence with the political leadership."

Nair then goes on to accept the challenge of defense economics in India by laying out his case with lots of data and sources, and concludes with the following:

Besides external defense, internal security and human-development form a vital part of the overall security and well-being of the nation. Is the rupee being spent wisely? The answer is in the negative both in terms of quantum and efficacy. DE has risen to unsustainable levels in the last decade primarily on account of dependence on imports and nuclearization. There is a trade-off between defense and developmental spending specifically in the area of health which becomes visible in poor human-development parameters like infant mortality rates and child malnutrition. Bangladesh is well ahead of India in these parameters. Internal security has been neglected for too long. There is a need to balance overall expenditure to meet the challenge of the emerging economic and strategic scenario. Force levels need to be reviewed. Like obsolete equipment, obsolete organizations should be dispensed with. The army has become equipment and staff oriented. It also remains manpower-intensive with too few junior officers and a large tail. The Thirteenth Finance Commission could look into aspects of internal and external security to come to a reasonable limit for both. It would also be expedient if the Commission specifies what constitutes defense spending and whether Defense Services Civil Estimates should form part of defense expenditure. DE must be capped at current levels.

I agree with Col Nair's conclusion, and would like to see similar detailed analysis of Pakistan's defense expenditures. Though the problems of poverty and hunger in Pakistan are a bit less serious than in India, Pakistan suffers from high illiteracy and low levels of human development that pose a serious threat to its future.

India has the dubious distinction of being among the top ten on two very different lists: It ranks at the top of the nations of the world with its 270 million illiterate adults, the largest in the world, as detailed by a just released UNESCO report on education; India also shows up at number four in military spending in terms of purchasing power parity, behind United States, China and Russia.

Not only is India the lowest among BRIC nations in terms of human development, India is also the only country among the top ten military spenders which, at 134 on a list of 182 nations, ranks near the bottom of the UNDP's human development rankings. Pakistan, at 141, ranks even lower than India.

India also fares badly on the 2009 World Hunger Index, ranking at 65 along with several sub-Saharan nations. Pakistan ranks at 58 on the same index.

Access to healhcare in South Asia, particularly due to the wide gender gap, presents a huge challenge, and it requires greater focus to ensure improvement in human resources. Though the life expectancy has increased to 66.2 years in Pakistan and 63.4 years in India, it is still low relative to the rest of the world. The infant mortality rate remains stubbornly high, particular in Pakistan, though it has come down down from 76 per 1000 live births in 2003 to 65 in 2009. With 320 mothers dying per 100,000 live births in Pakistan and 450 in India, the maternal mortality rate in South Asia is very high, according to UNICEF.

The reality of grinding poverty in resurgent India was recently summed up well by a BBC commentator Soutik Biswas as follows:

A sobering thought to keep in mind though. Impressive growth figures are unlikely to stun the poor into mindless optimism about their future. India has long been used to illustrate how extensive poverty coexists with growth. It has a shabby record in pulling people out of poverty - in the last two decades the number of absolutely poor in India has declined by 17 percentage points compared to China, which brought down its absolutely poor by some 45 percentage points. The number of Indian billionaires rose from nine in 2004 to 40 in 2007, says Forbes magazine. That's higher than Japan which had 24, while France and Italy had 14 billionaires each. When one of the world's highest number of billionaires coexist with what one economist calls the world's "largest number of homeless, ill-fed illiterates", something is gravely wrong. This is what rankles many in this happy season of positive thinking.

It is time for major South Asian nations to deal with the urgent need for careful balancing of their genuine defense requirements against the need to spend to solve the very serious problems of food, education, health care and human resource development for securing the future of their peoples.

Related Links:

UNESCO Education For All Report 2010

India's Arms Build-up: Guns Versus Bread

South Asia Slipping in Human Development

World Hunger Index 2009

Challenges of 2010-2020 in South Asia

India and Pakistan Contrasted 2010

Food, Clothing and Shelter in India and Pakistan

Introduction to Defense Economics

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3 Comments:

Blogger Riaz Haq said...

Recently, a former editor of the Statesman in Calcutta, Sunanda K Datta-Ray, humorously wrote in the Indian Telegraph what the answer would be to anyone questioning British aid to India, saying that the likely retort would be along the lines of: “Well, after they’ve paid for their military and space programmes, there’s very little left for food."

April 13, 2010 at 5:30 PM  
Blogger Riaz Haq said...

Here's an excerpt from a BBC report on British aid to India:

The government is expected to freeze the level of assistance given to India at £295m ($480m) a year. But why does a nuclear power with its own space programme need British aid?

In a widely-signalled move, it is anticipated that International Development Secretary Andrew Mitchell will announce the amount of aid given to India will be maintained at 2009/10 levels.

But the decision has attracted criticism from newspapers and politicians who say the UK taxpayer does not need to donate to a state that is itself a foreign aid donor, which is classified by the World Bank as a middle income country (MIC) and whose economy is growing at nearly 10% a year.

However, advocates of aid say a third of the planet's population who are below the World Bank's extreme poverty line live in India. They also argue half of all children in the country are malnourished and it does not have the tax base to eliminate poverty though internal wealth redistribution.

Andy Sumner of the Institute of Development Studies says: "If UK aid was reduced, there is no guarantee that the funding to the poorest states where most of India's chronically poor live would be topped up by the Indian government."

Although the Department for International Development's budget has been unaffected by the government's spending cuts programme, the UK is expected to stop direct aid to 16 countries, including Russia, China, Vietnam, Serbia and Iraq.

http://www.bbc.co.uk/news/magazine-12607537

March 1, 2011 at 8:45 AM  
Blogger Riaz Haq said...

India tops arms imports in the world, according to Bloomberg News:

India replaced China as the world’s top weapons importer, according to a study by the Stockholm International Peace Research Institute, as it aims to modernize its armed forces and project power through the region.

India received 9 percent of the volume of international arms transfers from 2006 to 2010, with 82 percent of that coming from Russia, Sipri said in a report released today. That topped China, South Korea and Pakistan, it said.

“The increases are substantial, and if you look at the Indian plans for the near future, they are massive,” Siemon Wezeman, a Sipri researcher who helped write the report, said in a telephone interview. “It’s worrying from the fact you are bringing a lot of weapons into an area that isn’t particularly stable, where you’ve got countries that have been at each other’s throats.”

India’s internal security threats and rivalries with Pakistan and China, the nuclear-armed neighbors with which it has border disputes, have driven the increase in expenditures, Wezeman said. The country’s plans to boost defense spending in the next decade to modernize the military have attracted U.S. and European firms banned from selling weapons to China.

The average volume of worldwide arms transfers in 2006-2010 was 24 percent higher than in 2001-2005, the report said. The Asia-Pacific region led the world, accounting for 43 percent of arms imports. It was followed by Europe at 21 percent, the Middle East at 17 percent and the Americas at 12 percent.
Economic Growth

India’s $1.3 trillion economy may expand by as much as 9.25 percent in the next financial year, the fastest pace since 2008, according to a Finance Ministry survey released last month. The World Bank estimates that more than three-quarters of India’s 1.2 billion people live on less than $2 a day.

Purchases by India of submarines, aircraft carriers and transport airplanes “can only be seen in the framework of regional ambitions,” Wezeman said.

India is seeking to buy 126 warplanes in the world’s biggest fighter-jet purchase in 15 years, according to the Indian Defense Ministry. Paris-based Dassault Aviation SA (AM), Chicago-based Boeing Co. (BA), Bethesda, Maryland-based Lockheed Martin Corp. (LMT), Sweden’s Saab AB (SAABB), Russia’s United Aircraft Corp. and European Aeronautic, Defense & Space Co., based in Paris and Munich, are competing for the contract.

The outlays on weapons have allowed India to demand technology transfers as part of purchases, Sipri said. The U.S. and Europe have banned weapons sales to China since the 1989 Tiananmen Square crackdown. U.S. military officials have questioned China’s motives in developing ballistic anti-ship missiles and radar-evading fighter jets.
‘Huge Market’

India is “in a position where they have this huge market at a time when exporters are in desperate need to find export markets,” Wezeman said.

The U.S. remains the world’s largest exporter of military equipment, accounting for 30 percent of arms deliveries between 2006 and 2010, the report said. The Defense Department is requesting $671 billion for the 2012 fiscal year starting Oct. 1, $37 billion less than this year’s request.

Stockholm-based Sipri, founded in 1966, conducts research into conflict, armaments, arms control and disarmament, according to its website. A substantial part of its funding comes from the Swedish government, it said.

March 13, 2011 at 6:45 PM  

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