Weak economics of a strong defence budget

The current defence budget formulation largely involves incremental budgeting (8-10 per cent increase in nominal terms over the previous year), with usually no separation between inflation-induced and real increase in expenditure. No groups at the planning or strategic levels, whether at the Planning Commission or at the Prime Minister’s Economic Advisory Council, appear to be analysing the defence budget from forward strategic planning perspective incorporating current and prospective threat perceptions. The budget proposals are also not subjected to analysis from the perspective of defence economics as a distinct sub-discipline and profession. This is a serious gap, which needs to be urgently addressed in an era when geopolitics and geo-economics are increasingly inter-related. While this is recognised by other major powers, particularly China, India has been relatively slow in integrating the two to enhance its economic and security space and leverage