Abstract
Given the rapidly escalating cost of modern weapons systems, the capacity of economies to generate sufficient surpluses to sustain comprehensive programs of military modernisation has become a critical determinant of modern military power. An associated question is the degree of efficiency with which a defence establishment is able actually to utilise resources available to it. This latter issue becomes especially important in a period of fiscal stringency such as the one through which India is currently passing. These key aspects of the relationship between the economy and defence form the subject of the present chapter.
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Endnotes
The term originated with Prof. Raj Krishna.
See for example, Amiya Kumar Bagchi, ‘An Economic Policy for the New Government’, Economic and Political Weekly, Vol. XXV, No. 6, 10 February 1990.
Montek S. Ahluwalia, ‘India’s Economic Performance, Policies andProspects’, in Lucas and Papanek, The Indian Economy, pp. 351–353.
Bagchi characterised the Gandhi economic reforms as constituting ‘import-led growth’. See ‘An Economic Policy for the New Government’, p. 317.
India Today, 15 February 1991, p. 109.
Government of India, Economic Survey 1990–91, Table 7.6, p. 109.
Data from Economic Survey 1990–91, Table 7.6, p. 109.
B.B. Bhattacharya, India’s Economic Crises, Debt Burden and Stabilisation, B.R. Publishing Corporation, New Delhi, 1992, p. 9.
Economic Survey 1990–91, Chart 9.10, opposite p. 169.
The story may be apocryphal, but the Janata party supposedly lost the 1980 election because of the soaring price of onions!
Bhattacharya, India’s Economic Crises, Figure 1.2, p. 6.
Calculated from Tables 1.1 and 7.1, Economic Survey 1989–90.
Economic Survey 1990–91, p. 3.
Chart, Far Eastern Economic Review, 23 July 1992, p. 53.
‘Fallout of Gulf crisis: Indian exports suffer’, Indian Express, 27 September 1990.
Bhattacharya, India’s Economic Crises, p. 1.
‘Freeing India’s Economy’, The Economist, 23 May 1992, p. 22.
‘Where India’s reforms get stuck’, The Economist, 22 January 1994, pp. 25–6.
‘Foreign investments rising’, The Hindu (International Edition), 18 December 1993. It is interesting to note that figures for foreign investment for East Asia, which seem far higher than those for India, are often based on approvals rather than actual investment.
Australian Department of Foreign Mfairs and Trade, India: Country Economic Brief--MaylJune 1993, p. 2; Prem Shankar Jha, ‘Learning to Think Positively’, The Hindu, 14 April 1993, p. 9.
Australian Department of Foreign Attairs and ‘Irade, India—country Economic Brief, May/June 1993, Department of Foreign Affairs and Trade, Canberra, 1993, p. 6.
Australian Department of Foreign Aftairs and Trade, ‘India’s Economy at the Midnight Hour’, p. 32.
For the Merril Lynch assessment see ‘Indian economy likely to grow8 p.c. next year’, Times of India, 17 December 1991.
East Asia Analytical Unit, Department of Foreign Affairs, ‘India’s Economy at the Midnight Hour: Australia’s India Strategy’ (draft), Canberra, 1994, p. 2.
For example, an article in the Washington Times concluded that Indian defence spending fell by a massive 28% between 1990–91 and 1991–92, a figure that, while accurate, is misleading. See Brahma Chellaney, ‘Military growth in India over; funds cut’, The Washington Times, 7 August 1991.
See the author, ‘Indian Defense Spending: Treading Water in the Fiscal Deep’, Asian Survey, Vol. XXXII, No. 10, October 1992.
The paradox is explained by the fact that, for contract purposes, the rouble was fixed whereas the rupee was valued against a basket of hard currencies. See S.S. Anklesaria Aiyer, ‘Rouble’s Devaluation Coming: How To Cut India’s Debt By Rs 37,500 CR.’, Times of India, 8 May 1992.
Calculated from G. Balachandran, ‘India’s Defence Expenditure: Widely Varying Estimates, Strategic Analysis, Vol. 14, No. 9, December 1991, Table 3, p. 1053, using the ACDA figures, and Economic Survey 1990–91, Table 7.4, pp. S-85–6.
Manoj Joshi, ‘Defence Demands’, Frontline, 3–16 August 1991, p. 13.
‘In Reverse Gear’, India Today, 15 November 1991.
The author, ‘Indian Defense Spending’, Asian Survey, Vol. XXXII, No. 10, October 1992, pp. 936–9, gives an account of how this calculation is derived.
For example, using the official figures for 1988–89, the most recent year for which we have actual expenditure, defence spending was 2.9% of GDP including pensions according to Table 7.3, p. 102, Government of India, Economic Survey 1990–91.
Ravi Rikhye, ‘Indian Defence Budget Fact and Fantasy’, Economic and Political Weekly, 29 April 1989, p. 907.
Accorduig to Economic Survey 1991–92, it fell from a high point of 3.4% of GDP in 1986–87 to 2.1% (BE) in 1991–92. See Table 2.3, p. 6 (English version).
IDSA, Asian Strategic Review 1992–93, p. 47. The IDSA calculations are based on somewhat different data than those given inTable 1.11.
The Sri Lankan exercise reportedly cost $300 to $400 million annually. See the evidence of Paul Kreisberg before the US Subcommittee on Asian and Pacific Affairs, Committee on Foreign Affairs, House of Representatives, March 1989, p. 668.
It should be recognised, however, that the shifts may be explainable in terms of how individual contract payments happened to fall in any one year or the stage in the life cycle of equipment that a particular force might happen to possess.
Lt Gen. K.K. Nanda (Ret’d), ‘Cost Effective Defence’, Indian Defence Review, January 1991, p. 81.
Manoj Joshi, ‘Defence Demands’, p. 12.
Joshi, ‘Defence Demands; Change of Guard’, Frontline, 31 July 1991, p. 56; K. Subrahmanyam, Theatre commands’, The Economic Times, 20 July 1993.
Col. Arjun Katoch (Ret’d), ‘AirLand battle—Its Future and Implications for Third World Countries’, Indian Defence Review, October 1991, p. 50.
As interviewed in Defense and Foreign Affairs, see ‘Boarding a Moving Train: India’s New Minister of State for Defence, Raja Ramanna’, Defense and Foreign Affairs, Vol. XVIII, April 1990, p. 46.
See Manoj Joshi, ‘Defence Demands’, Frontline, 3–16 August 1992.
Figures are based on The Military Balance for respective years.
Calculated using the numbers of serving members of the armed forces as given in The Military Balance for respective years, the Defence Services Estimates (actuals) for 1982–83 and the Budget Papers (revised estimate) for 1991–92. The real expenditure has been calculated from the index numbers for wholesale prices (average of weeks) at Table 5.1 in Economic Survey 1990–91, with the 1991–92 index assumed at 199.
Calculated using the figure for total defence spending given in Table 1.10, above.
Sub theme box on ‘teeth to tail’ ratio in Shekhar Gupta and Paranjoy Guha Thakurtha, ‘Heading for a Crisis’, India Today, 28 February 1989, pp. 94–95. We need to note here, however, that an Indian division is larger than a Chinese division.
Calculated from the Defence Services Estimate for 1988–89 (actuals) and Budget Papers for 1991–92 (revised estimate).
‘Chinks in the Armour’, India Today, 15 November 1991, pp. 173–9.
‘Anti-tank missiles hit 100 pc targets’, Hindustan Times, 27 April 1992.
‘In Choppy Waters’, India Today, 30 September 1990, p. 145. In an interview with the author in New Delhi in 1991, Commander Uday Bhaskar of IDSA also pointed out that one of the reasons the vessel was lost was because the pumps were not working.
Christopher Thomas, ‘India puts outlays on Army in mothbalLs’, The Australian, 12 March 1992. See also ‘India cuts arsenal’, Aviation Week and Space Technology, 23 March 1992, p. 13.
Two advocates of the radical cutting approach have been Col Arjun Katoch (see ‘Restructuring set-up’, The Hindustan Times, 2 April 1992) and G.C. Katoch (a former financial adviser to the government—see ‘Defence Expenditure—Some Issues’, Indian Defence Review, January 1992). For a view that opposes any further cuts see C. Uday Bhaskar, ‘No scope for Defence cuts’, Hindustan Times, 1 April 1992.
See interview with the then Defence Secretary Seshan, in Defense and Foreign Affairs, Vol. XVI, No. 12, December 1988, p. 22.
Asia-Pacific Defence Reporter, June-July 1992, p. 25.
See a speech by Pawar, ‘Nation can repulse Pak attack: Pawar’, Times of India, 24 July 1991.
According to Manoj Joshi, this was one of the recommendations of the Arun Singh Committee. See ‘Defence Demands’, Frontline, 316 August 1991.
See interview with Sharad Pawar, ‘We will sell guns’, India Today, 15 November 1991, p. 174.
‘India, South Korea look to Soviets’, Jane’s Defence Weekly, 14 September 1991, p. 488.
Quoted in ‘ H eading for a Crisis’ by Shekhar Gupta and Paranjoy Guha T hakurtha in IndiaToday, 28 February 1989, p. 97.
Amit Gupta, ‘India and the Arms Bazaar of the Nineties’, Economic and Political Weekly, 22 September 1990, p. 2129.
David Silverberg, ‘India Faces Roadblocks in Export Drive’, DefenseNews, Vol 6, No. 46, 18 November 1991, p. 1 and p. 36.
Asia-Pacific Defence Reporter, April 1991, p. 22.
Amit Gupta, ‘India and the Arms Bazaar of the Nineties’, p. 2129.
Vayu, No. IV, 1990, p. 5.
Pravin Sawhney, `India unlikely to meet arms exports target’, Times ofIndia, 20 January 1992.
IDSA, Asian Strategic Review 1992–93, p. 53.
Calculated from ‘Industry builds up strength’, Jane’s Defence Weekly, 26 May 1990, p. 1039.
Pravin Sawhney, ‘India unlikely to meet arms export target’.
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© 1995 Sandy Gordon
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Gordon, S. (1995). The Economy and Defence. In: India’s Rise to Power. Palgrave Macmillan, London. https://doi.org/10.1057/9780230371804_4
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