AN ANALYSIS OF THE INDIAN DEFENCE EXPENDITURE DURING 1963-1991

Abstract

Defence and defence spending are 'euphemisms' shrouded in a veil of secrecy/mystery. Defence spending has been described as a holy cow in view of the passions it arouses. A section amongst different societies, views ii as 'anti-people' or 'anti-development' as spending on defence is often considered as synonymous with 'war'. However, there is no gainsaying that when viewed in a wider and a 'positive' context,defence spending is considered as conducive to growth and development of a country. In fact, there is little disagreement on the assessment that the extent of defence spending is largely an indicator of the guarantee against external aggression. Whether or not a country can augment the required resources to do so or if not how it proposes to 'offset' the potential threat of external aggression, is another matter. In fact, defence is a basic necessity of any nation irrespective of the economic and political ideologies she pursues. In a world beset with wars that have taken place in the past/ going on at the present and which finds itself on the precipice of 'nuclear' annihilation, there is no dearth of studymaterial on the issue. The views expressed (by various authors > vary -from being theoretical, neoclassical/neo- marxist on the one extreme to being outright hawkish, on the other. The two extremes are however bridged through a whole gamut of issues such as relations between neighbouring countries, geographical size and general level of development, geo-political and strategic considerations, relations of the host country with different power blocks/super powers Ctill the stage this was relevant), economic, commercial and so on. There is, however, a consensus that some of the key issues involved in ascertaining defence spending are the threat of external aggression, level of economic development, resource endowment/ availability, and what is expected of the state per se not discounting the regional/inter-regional and international issues. Taking an overall view, the various factors influencing defence spending could be broadly categorised as global, national, regional and economic. Globally, adherence to a major power, foreign military aid, influence of foreign capital and the influence of major aid donorCs) appear to be the relevant determinants. The national issues are the nature of the state, political ideology pursued, internal stability/instability, problems due to insurgencies etc. At the regional level tension between neighbouring countries, impact of cold war in influencing such relations, politico-military ambitions of the countries constituting the region and the intra-political stability/instability of the nations merit consideration. The relevant economic issues are the level of economic development, 11 real income growth, size of the ssttaattee hbu,d„gwet, f<•oreign exchange availability, and so on. Statement of the Problem , The Issues Involved Interestingly, military capabilities of nation/nations, in the past as well as at the present times, have also been utilised to protect and/or to advance commercial as well as geo-politico-economic interests of the concerned country/countries. Thus, developing/improving defence capabilities of a country is a multifaceted concept as more than one purpose is likely to be served in so doing, as is lucidly brought about through the aforesaid analysis. The parameters constituting it, have formed the basis of the emerging international relations in the post second world war scenario which has also thrown up the concept of power blocks. The role played by them, in influencing international relations is well understood and needs no explaining. The philosophy behind the 'power blocks' and the concept of forming military/economic alliances did not appear to hold much water for a country with India's background, because Ci) she had inherited one of the longest living civilisations and a large geographical entity, Cii) a well developed and evolved open ,* society, steeped in scientific and technological skills/values and trade practices, Ciii) the aforesaid assets proving conducive to iii spreading education and in throwing up a mature political leadership and, Civ) her long colonial history motivating her not to antwr into any now alliances/understandings with either of the power blocks. The accent in the post independence era, therefore, was on 'self-evolution' and 'overall development' with defence needs not receiving priority. Cv> The existence^!' an 'anti-imperialistic' 'wave' and the absence of a powerful nation inimical to her interests contributed to such a thinking in no small a measure. From such an innocuous beginning, India has come a long way and is considered a major military power in the present times. The reasons that have led to this transformation could form the basis of a useful study in order to understand the circumstances that have led/could have lead to defence usurping a larger share of the national resources than what was originally conceived. This would necessitate identification of different parameters which could have influenced Indian defence spending and their relative impact in so doing. It is these aspects which form the core of the present study. The period under reference is from 1963 to 1991. The year 1963 was selected as the 'cut off point due to drastic changes in the security perceptions resulting from the strained relations with China culminating in a conflict in late 1962. This led to a massive hike in the defence spending in the next financial year i.e., beginning 1963. Evidently, this was the iv first occasion in her brief post-independence history when India experienced the spectre of an external aggression. The said period was chosen for the study as it was extremely varied in content on account of its having witnessed : (a) A period immediately following an 'enforced' war without adequate military preparations CSino-India war of late 1962); Cb) A war in which the country was much better prepared militarily, both in terms of infrastructure and hardware CIndo-Pak war Sept. 1965); Cc) A war gone into with vastly improved resource mobilisation and preparedness in terms of logistics, hardware and a radically changed stress on relative importance of different organs of the defence forces i.e. with the emphasis shifting on to air and naval defence CIndo-Pak war in Dec. 1971); Cd) A resultant change in the futuristic planning as to the relative importance to be accorded to the Army, Navy and Air Force in view of the implications of the war efforts at Cc); Ce) Changes in the post 1986 scenario which envisaged greatly enlarged priority being accorded to the Navy. The idea behind this was, perhaps, to transform the Navy into a 'blue water' Navy with a view to protect the increased stake on the 'off-shore economic assets'; Cf) Periods of political instability; Cg) Cold war and it's possible after effects on the Indian defence system; Ch) Periods where governments with massive majority were voted into power, bringing into effect an era of 'long term futuristic planning'; Ci) A diversification of the role of the defence forces in safeguarding the geo-political interests of the country by helping the neighbouring countries to attain political stability and at the same time ensuring that other forces, inimical to Indian interests, were kept out of the region, and Cj) Increasing incidence of internal strife and the problems emanating from insurgencies in the western and eastern sectors of India. Scope/objectives In order to understand the nature of the defence expenditure, a thorough understanding of the principal determinants influencing it was arrived at. This was also helpful in putting forth futuristic plans and at the same time carrying out resource optimisation in an area requiring large input of national resources. The variables influencing defence expenditure emerged only after a rigorous as well as a realistic analysis of the overall changing trends and were grouped as geo-political, geo-strategic, technological and short/long term perspectives of her needs. The relative influence of each of these variables, vi however, varied from time to time. Objectives of the study Accordingly the present study was initiated with a view to : CD analyse the Indian defence spending during the period 1963-91 and to assess the causes responsible it's variation, (2) find out the basic determinants influencing such an expenditure, gauge their precise role in so doing and to assess, if possible, their relative impact and, C3) offer suggestions by way of likely policy implications. Research methodology Details concerning research methodology involving phase phase-wise Planning, the data and analytical procedure followed is given in chapter i C section 1.7) CI) The Data The study is based upon secondary data drawn from authentic sources such as the reports and working papers of Ministries of defence and of external affairs, Government of India, publications emanating from and/or sponsored by : Stockholm International Peace Research Institute CSIPRI), Sweden; Arms Control and Disarmament Agency CACDA), US; The International Institute for Strategic Studies CUSS), London, UK; Institute for defence studies and analysis, New Delhi; International Defence Review, Jane's Defence Weekly, Jane's Defence Magazine, Sainik Samachar etc. to name the major ones. vn Cii) Analytical Procedure Although simple tabular analysis has been used yet the multi-variate analysis has been the main plank of the present study. Regression equations were tested for specification error, if any. The estimates of multiple regression analysis were also tested for multicollinearity, heteroscedasticity and auto correlation. Problems emanating from simultaneous relationshipCs) and /or multicollinearity amongst the explanatory variables, were detected by the zero restriction method. Similarly, for detecting auto-correlation through the Durbin-Vatson test, Ca frequent problem in time series data ), and for removing the resulting distortions, Cochrane-Orcutt procedure was used. The present study also makes extensive use of the 'dummy variable' technique which enabled computing of effect of different variables -something that is normally difficult to quantify, e.g. the effect of the years witnessing intensive cold war, years of political instability and military rule in Pakistan, state of Sino-India relations as well as Indo-US relations,normally difficult to quantify, could be estimated by using dummy variables. MAJOR FINDINGS The Indian defence outlays over the period 1963-90 expressed as Net Revenue Expenditure CNRE) and as Net Capital Expenditure CNCE), as a function of GNP and central government vm expenditure <CGE>, could be interrelated with prominent political and technological events and could thus be viewed in terms of specific/definite economic/strategic events. They also represented a clear shift in militaristic thinking with an increasing accent on developing the air force and the naval wings Cof the defence forces) as also the advent of 'short term' and 'long term' planning processes. A comparison with the defence outlays of Pakistan and China, viewed in the backdrop of their respective GNP's and CGE's, proved helpful in arriving at an insight into the thinking of these countries on the issue and its impact on the strategic thinking /planning process mooted by India in formulating her own frame work on this vital issue. Such an analysis also formed a useful basis of arriving at the probable determinants influencing India's defence/policy/outlays.Evidently interregional and global issues also influenced the eventual assessment. A thread bare analysis of the determinants involving their geo-political, geo-strategic, techno-economic aspects proved extremely helpful in judging their Cdeterminants) relative impact in influencing defence spending qualitatively. Regression based quantitative analysis revealed that 'Pakistan factor' had the maximum impact on the Indian defence outlays.The other determinants in the decreasing order of effect are the Indo-US relations in 't-1' period, Inflation existing in